Planning your lean manufacturing strategy during a recession

The tough economic times are forcing manufacturers to tighten their belts. Lean manufacturing initiatives can be expensive, but finding small ways to implement lean into the production process now can mean big savings later.

Whenever the economy turns sour, manufacturers inevitably turn to cost-cutting measures to help conserve capital. Lean manufacturing, a philosophy for reducing waste in production and execution, is a proven mechanism for cutting costs.

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But for manufacturers just beginning to plan a lean initiative, this may not be the time to press ahead with a major effort to integrate lean throughout the enterprise. Few manufacturers have the money or personnel to devote to a large lean implementation right now.

Still, there is no doubt the economic downturn is spurring interest in lean manufacturing. "The economy drives people to want to do lean even more," said Mike Burkett, vice president of research, product development and manufacturing solutions for AMR Research Inc., a market analysis firm that specializes in manufacturing.

Manufacturer explores benefits of lean manufacturing

That was the case with S&C Electric Co., a manufacturer of switching and protection products for electric power transmission in the Chicago area. According to engineering systems manager Alec Gil, S&C has been using lean principles for more than a decade. But it took the economic downturn to make the company get serious about lean.

A year ago, executive management formed a steering committee to determine why the company was not seeing more benefits from its lean implementation. The committee concluded that S&C should adopt a formal methodology for lean in order to institutionalize the philosophy. Without that, the gains from the lean implementation would be scant.

The team immediately decided to adopt the Toyota Production System (TPS) methodology to formally propagate lean throughout the organization. A manager of continuous improvement was appointed, with a staff of about 10.

S&C had "about 70 to 80 kaizen events" over the past year, according to Gil, in areas ranging from production to the back office -- even down to the print shop and cafeteria. Some of the most important process improvements have come in the reduction of machine set-up times. Throughput has increased, he said, and the company has seen overall benefits in terms of cost reductions and improved velocity.

S&C's expansion of its lean efforts has indeed helped the firm weather the economic storm, Gil said. But many manufacturers may not be able to marshal the resources necessary to institutionalize lean on an enterprise scale. Those companies may have to be content with making small but noticeable improvements at a few pain points.

Lean adoption growing among manufacturers of all sizes

Though it is difficult to find reliable statistics as to the rate of lean adoption among U.S. manufacturers, anecdotally there is evidence that lean is pervasive among manufacturers of all sizes, at least in a siloed form. "Lean adoption is actually pretty widespread," Burkett said. "It's in silos, though."

Many companies, particularly small to medium-sized manufacturers, have adopted lean practices in one or two areas, adopting kanban on a particular production line, for example. Companies like S&C, which have fully integrated lean throughout their organization, are the exception, Burkett said.

As a general rule, companies that have had tight margins for years are much more mature in terms of lean adoption than those that have not endured such margins, he said. The classic example of a vertical where lean has long been common is the automotive industry (where lean first appeared). But Burkett is seeing increased interest in lean in verticals such as aerospace, defense and high tech. Large players like Boeing and Lockheed Martin have been using lean practices for years but are seeking to include their smaller suppliers. Rather than pockets of lean, these companies are seeking now to become lean as a value chain.

Lean adoption drivers

The need to reduce costs is the most common pressure leading companies to adopt lean initiatives.

Operational costs 79%
Customer mandates 35%
Corporate revenue goals 26%
Global supply chain 20%
High volatility in demand 15%
Inventory obsolescence/write-off 10%

Source: Aberdeen Group, "Lean Manufacturing: Five Tips for Reducing Waste in the Supply Chain," April 2009

Benchmarking lean adoption rates

Boston's Aberdeen Group has been conducting lean adoption benchmark studies for the past three years. "The data has been pretty consistent," says Narayanan Viswanathan, Aberdeen vice president and principal analyst, supply chain management. "People who have focused on lean have continued to focus on lean through the downturn. This is highly correlated with best in class." Once these companies get past a few years of doing lean, they tend to stick with it.

Getting started with a lean initiative

If you have not already started an enterprise effort, now is a good time to begin lean on a narrowly focused pilot project or two. "Instead of creating a big program, just go in and start fixing problems," Burkett advises. "Don't do a deep study. Just fix something in a short period of time."

The good news is that it's simple to begin: Just take a walk around your production floor and observe how things go. When you see a process that needs improvement, dig in.

About the author: Lauren Gibbons Paul writes regularly on manufacturing technology issues. She can be reached at lauren.paul@comcast.net

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