Sunday, November 2, 2014

Lean Manufacturing:

The Challenge: (an online printing company that delivers printed marketing materials) was facing two main issues: manufacturing errors and delays. As the company expanded in 2008, so too did the amount of waste and production/delivery errors. Too much excess paper was being thrown away in the production of business cards and other print jobs; moreover, production delays and flaws were becoming more common, effectively shrinking gross margins.

The Solution: The Company’s CEO (David Handmaker) began researching how to improve the manufacturing process in a ‘holistic’ way. He was recommended to read the book, “The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer.” This book explains how Toyota used Lean Manufacturing techniques to reduce wasted time and resources, as well as install higher quality-control measures. Handmaker was impressed, and thus had his management team read the book and begin deploying such methods. However, the results did not turn out as well as to be expected; they were not successful in lean implementation.

The next route was to hire a vice president of manufacturing, with qualifications in understanding lean manufacturing philosophy and techniques. Ben Nouri was subsequently hired and quickly began to help the company figure out ways to save time and money. Nouri taught managers, for example, what types of metrics they needed to track and how to make a “pareto analysis” – a lean manufacturing technique based on the concept that 80 percent of waste is caused by 20 percent of causes. In a bottom up fashion, Nouri asked managers to identify the top causes of waste in their areas and find ways to address it.

The Results: Results were impressive: managers were able to make significant time and money-saving improvements. For example, they came to realize that printing press operators were spending more than 5 minutes walking across the plant to pick up needed plates. Moving these plates closer saved considerable amounts of time and made printing jobs run much smoother. Increased efficiencies were also seen in the company’s call center, where managers were able to reduce ‘call-abandonment rates’ by analyzing the reason why callers were hanging up (resulting in lower wait times). Finally, Nouri aided in determining how to minimize paper waste in the production process, saving the company $500,000 a year. Notwithstanding the efficiency improvements, lean manufacturing had also changed the company culture; they now had a quality-control department consisting of ‘daily huddles’ to assure better coordination and work flow between various groups.

Lean manufacturing techniques at has clearly provided substantial financial and operational improvements. Specific improvements consist of the following: 
  • On-time delivery rates rose from 90% to 99.7% 
  • Gross margins have grown by 3-4 percentage points
  •  Error rates have dropped

Lean Manufacturing Overview: “Lean” effectively means to cut out the “fat” in the production process that makes it inefficient and does not add value to the product. The idea is that many manufacturers could work more economically by utilizing their time, production space, or other factors more efficiently. There are three main principles for lean manufacturing:
  • The pursuit of continuous improvement 
  • Focus on total quality
  • Keep cycles short

Of course, lean manufacturing affects everything related to the production process, including people, process and technology. To begin lean manufacturing within a company (as attempted), it is imperative to begin with the “5S’s”, a foundation of the lean environment. They consist of the following:
  • Short
  • Set in order
  • Shine
  • Standardize
  • Sustain

Finally, another useful tool (to identify all factors in production that do not add value to the production itself) consists of the “7 Forms of Waste”, shown in Figure 1, below.

Figure 1. Note: total elimination of waste inventory would create “Just-in-Time Production” which is not suitable for every business. However, it may be suitable for those companies hoping to reduce their inventory and to review their order system closely.

Thoughts: Although lean manufacturing is highly regarding for accomplishing its main goals (to eliminate waste, reduce management for large inventories, and provide optimum quality), there seem to be several disadvantages associated as well.

Implementation seems to be a rather high cost. Training employees may be lengthy, leading to increased payroll expenses. Similarly, purchasing of machinery to increase efficiency may be a necessary cost for lean effectiveness; this, however, adds to long-term debt. Thus, small and medium-sized business may find the cost of changeover to lean manufacturing processes rather excessive, creating a major barrier in adoption.

Finally, lean manufacturing processes require a complete overhaul of manufacturing systems, which may lead to stress and even rejection by employees who prefer the traditional ways. Additionally (for successful implementation) there is a required level of employee input on quality control, leading to the possibility of some feeling unqualified for such a task. I believe this is where excellent management leadership is of the utmost importance, as they become a crucial aspect in the changeover to lean manufacturing. However, each manager must have the proper training required to be a successful part of the changeover to lean manufacturing. As seen in the example, simply reading a book describing lean methods does not allow for success. There must be someone attending who has been exposed to the methods and techniques, and is able to convey the information well. Such was the result when Ben Nouri was brought on-board to train the management team.

Question: Was the lack of experience the only reason why could not successfully implement lean techniques into their business? What other (external) factors may have lead to implementation issues?




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