I have seen a tsunami trend washing over our customers — they are increasingly moving to tighter windows of delivery for their products as they attempt to streamline all their inventories while maintaining good delivery times to their customers. Praaxton Pressed Metals makes literally thousands of different stamped metal products, many of which are quite complex and rely on our unique proprietary processes. Because of this metal-engineering expertise, we steadily attract customers from all around the globe and in many industries, ranging from electronics to biomed to automotive.
Our delivery and quality metrics are OK — not great. But with business steadily rising and capacity overly tight, lead times are getting longer rather than shorter. Many customers accept our delivery performances because of our process technologies, but a few are getting vocal and demanding improved lead times. One company has pulled its business.
As the CEO, I like to meet first-hand with as many of our customers as possible. Increasingly, my fellow executives have proudly showed me their lean facilities, walking me through all their achievements and citing shorter lead times, lower inventories, improved customer satisfaction, and lower production costs due to less waste throughout the organization (not just on their shopfloors).
I'm no hermit. I've been reading about lean for years, and I am impressed with the manufacturing philosophy. I particularly like many of the organizational- and workforce-management concepts, such as aligning the company toward a few simple goals and having all employees engaged in problem-solving and improvement activities. But I've been hesitant to apply lean at Praaxton because of its materials-management techniques — such as one-piece flow and frequent, quick changeovers of equipment — unsure of how they can work in our exceptionally high-volume, high-mix production environment with dozens of complex presses. The learning curve seems too great and the potential negative impact on current delivery times too frightening.
Is there a way that I can roll out lean at Praaxton without the fear that I'll inadvertently bring the whole company down?
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
By Simon Ellis
Lean manufacturing, and other improvement flavors such as six sigma or total productive manufacturing, are ultimately just a set of tools to drive up productivity and drive out waste. Every business will be different and will have unique applications for lean principles. There is no question that the adoption of lean manufacturing has resulted in significant gains in productivity for the adopting companies, yet, to your point, it is important to ensure that you do not go too far and end up with a manufacturing operation that is "so lean, it is brittle." The business environment you describe — an "exceptionally high-volume, high-mix production environment with dozens of complex processes" — is certainly not foreign to lean manufacturing principles, and there are countless companies with comparable manufacturing profiles that have implemented lean successfully.
I would also echo your experiences with increasing service demands — both improved delivery performance (perfect order) and shrinking lead-times. We see this across almost all industry segments, not just metals, and it is about your customers being able to both reduce inventory levels and synchronize better to downstream service performance.
As you assess the applicability of lean manufacturing principles, the first place to start is a strategic consideration of your business' performance. What is your competitive distinction? Is your business successful primarily because you offer expertise/products that are not easily duplicated by your competition, or are you competing on price/service — most likely, given your question, it is both. How do you believe you compare to your competition? I would suggest looking at the following questions:
- How does your product quality compare in your industry — among the top five companies, middle of the pack, laggard?
- Is your cost structure in balance — do you believe you have been good at eliminating waste, or does this remain an opportunity?
- Where do your service levels put you in your industry — among the top five companies, middle of the pack, laggard?
- Are lead-time challenges driven by product/portfolio complexity, or do you have some manufacturing network challenges?
Depending upon your answers to these questions, the opportunities will be apparent. If the issue is the manufacturing network, take a "profitable proximity" approach to strategic sourcing, balancing cost, lead time, and changes in global demand patterns. Other than a manufacturing network that is no longer appropriate for your demand, lean manufacturing principles can help drive improvements in all the areas.
If you have deployed lean principles in any part of your business, leverage the learning — and certainly any experts that may reside within your employ. If lean is completely new, then identify the manufacturing shortcoming that is most problematic and pilot across a small subset of business processes. Implementing lean can have an enormously positive impact on your business, but you also must make certain investments:
- There must be executive sponsorship — a C-level champion to assure the workforce that this is a serious and committed program.
- Your business must have a lean expert — black belt or similar — who can demonstrate proper techniques.
- Involve the supply base/key suppliers.
- Offer appropriate incentives/compensation to incentivize the right behaviors.
As I stated at the outset, lean is about driving out waste — doing more with less — but it is a journey and not for the faint-hearted. It can make a significant difference to the performance of your business, but you must commit and stick with it if you are to get the results you need.
Simon Ellis leads the Supply Chain Strategies practice at Manufacturing Insights (www.manufacturing-insights.com), one of IDC's industry research companies that addresses the current market gap by providing fact-based research and analysis on best practices and the use of information technology to assist clients in improving their capabilities in key process areas. Simon can be reached at sellis@manufacturing-insights.com
By Trevor Miles
There is no doubt that lean principles have had a huge impact on manufacturing efficiencies, especially in high-volume, repetitive manufacturing. My experience, though, is that the low-hanging fruit also can be found in the processes of quote-to-order, order-to-delivery, and procure-to-pay — in other words, the processes that surround the manufacturing.
My recommendation is that Praaxton Pressed Metals starts with these processes because changes to these processes are a lot easier to implement than changes to existing equipment, and such changes can have a dramatic effect on the overall process lead time. I don't want to downplay the effort required in change management; I just think this is less risky than modifying a manufacturing process that has proven to be the company's competitive edge. You state this as the primary reason for not adopting lean so far, which I think is a valid concern given that the company has no experience with lean.
Value-stream mapping exercises, a standard lean approach to understanding the activities undertaken to carry out a process, frequently identify administrative processes as the greatest contributors to non-value-added work and as the longest lead-time components: Not only are unnecessary steps being carried out, but in cases where lead time is becoming an issue, administrative processes also eat into the time available to manufacture the product. Administrative processes are necessary in order to plan production and purchases, to provide a quote, and to take the order, but many contain a lot of unnecessary steps (i.e., waste). Every effort should be made to reduce lead time and the resources required to carry these out.
To illustrate the principle, consider a typical Praaxton customer that expects delivery in 10 working days. It would not be unusual in a build-to-order environment, such as yours, for the initial quoting process — quantity, price, delivery date — to take four days, the procurement process to take three days, and the delivery to take one day, leaving two days to actually make the product. Eliminating one day in the quoting process and one day in the procurement process doubles the allowed manufacturing lead time to four days.
While the additional manufacturing lead time does not increase the physical capacity, it increases greatly the flexibility with which the capacity can be used, essentially increasing the available capacity, possibly at the cost of a small increase in work-in-process inventory. This approach also allows you to maintain current production runs and frequency of changeovers until you can apply lean thinking on the plant floor to improve these capabilities (i.e., more, faster changeovers), further increasing Praaxton flexibility.
There have been many applications of lean principles to administrative processes, and standard lean methods can be used to analyze and improve administrative processes. Not only will Praaxton be able to show tangible improvements to its customer lead time, but it can embed a culture of lean in the organization before tackling the potentially more disruptive process of applying lean principles to its manufacturing processes. Applying a lean tool such as 5S (sort, straighten, shine, standardize and sustain), for example, will not only create a safe, organized, clean environment for improving the performance of administrative processes, but sets the stage for the cultural transformation that will be required when expanding lean to production.
A typical issue in unnecessary administrative process lead time is having multiple handoffs between different departments in order to determine when an order can be satisfied. For example, the sales organization will capture the initial request, do a credit check after quoting a standard lead time to the customer, and then pass the information on to manufacturing. Manufacturing waits for a regular MRP run before determining the materials and quantities required to satisfy the order, checks if there is sufficient capacity to make the goods on the order, and passes the order on to purchasing. Purchasing looks at existing raw material inventory and determines if an order needs to be placed for additional materials, in which case a purchase order is sent to a supplier. Imagine now that several iterations of these steps need to be carried out because, for example, there is a manufacturing capacity constraint. It is not difficult to see how the administrative lead time can quickly chew up the customer's expectation of a lead time.
Praaxton needs to have a single system in which sales, manufacturing, purchasing, and, perhaps, even suppliers can quickly and effective collaborate in a matter of hours, maybe even minutes, to determine when an order can be completed by comparing multiple scenarios.
Once you have made improvements to the administrative lead time, the lean mindset will have been planted and the environment will be more ready to tackle the more critical issue of improving manufacturing processes to improve quality. The next stage of lean adopted by Praaxton Pressed Metals should be to use 5S to organize the flow of materials through the factory and the setup of the presses. These can be used to reduce work-in-process inventory and increase the available capacity of the presses.
Trevor Miles is director of product marketing at Kinaxis (www.kinaxis.com), and is responsible for identifying market trends and translating these into high-level functional requirements for the company and opportunities for value capture by Kinaxis customers and prospects. Prior to joining Kinaxis, Trevor worked for i2 Technologies, where he held a number of sales and marketing roles and worked with global industry leaders such as Continental, Volkswagen, Nokia, and Thomson. Previous to i2, Trevor worked for Coopers & Lybrand performing several studies in supply chain reengineering for companies such as Levi's, Burmah Oil, TNT Logistics, AGA Gas, and Schneider Electric. Trevor has degrees in Chemical Engineering and Industrial Engineering. Trevor can be reached at tmiles@kinaxis.com