The Challenge For North American Organizations
North American companies have ever increasing material and healthcare costs, with relentless pressure from customers to significantly reduce costs.
Part 1
The recent media reports' citing the precarious position of North American companies brings to light options for them to follow. They can bemoan the hand which fate has dealt them in the form of unfavourable exchange rates, increased material costs, increased government imposed health care costs, while facing relentless pressure from customers to significantly reduce costs. Before the hand wringing and "woe is me" attitude leads to financial ruin or a takeover in an industry consolidation, there is a viable option to be considered.
The option is to embrace Lean as the way of doing business. This is not the "flavour of the day" that the boss mandates after having attended a one day seminar. Rather it is a journey that, through changing the way manufacturing and services and the associated support functions are carried out, enables the company to survive and grow.
The recognition that only 10% of activities are valued activities for which a customer will pay while 45% are non-value added but necessary and 45% are non-value added waste is an eye opener for most companies. This is reinforced by the replacement of the old approach to pricing of cost + profit = selling price by the new market reality of selling price (customer determined) - cost = profit. Waste elimination is manifested as a cost reduction, which to the glee of the accountants drops through to the bottom line. The current rebates being offered by the Big 3 auto companies is in effect the setting of the selling price by the buying public and with no reduction in costs, profit is severely squeezed.
Part 2
Today's lean, which has morphed from the Toyota based Just In Time approach to manufacturing, is vastly different from the "lean and mean" slash and cut approach of the once favoured business process re-engineering. Lean involves people at all levels in the waste reduction approach to business health.
A lean transformation is not the application of selected lean tools to current hot spot problems for short-term improvements that quickly fade, as the daily pressures remain unchanged. A planned implementation involves training in lean concepts and tools followed by a three-part Enterprise Value Stream Mapping ™. A current state map shows the customer lead time and records all activities and data necessary from the time the order is placed as well as the company's constraints that impede the flow of information and product/service to meet the customer demand. A future state map looks out 3-6 months at what the company can achieve with waste removed from the system. The goal is to meet customer demand and be flexible to meet oncoming changes in demand. A future state implementation plan lays out what the tasks are, when the tasks need to be completed, which lean tools to use and when to use them as well as who is going to be responsible for them. Without this step, companies fall into the trap of "point improvements" and creating short lived "exciting chaos".
Typical results achieved during the lean journey include: 90+% lead time reduction, 50% labour cost saving, 50% less space required, 10 times increase in inventory turns, and up to a 90% reduction in defects.