Last week I caught this article from IndustryWeek online, titled “Small Manufacturers Need to be Agile, Not Lean.”
The title alone got my attention. I had to see what the difference was.
Short story……….no difference.
Now the longer story. My jaded perspective is that is a consultant that is trying to make money (apparently with small businesses) by trying to sell something new. Or as I read it, Lean with a different dress on it. I hate to call people out so blatantly but this article was just wrong.
Much of what is written about lean manufacturing simply isn’t applicable to small manufacturers, most of whom make their money by meeting specific service specifications for specific customers. When lean literature says, “Only make what the customer wants when the customer wants it,” small manufacturers say, “That’s the central facet of our business. You mean there are companies who make things nobody wants?” When lean literature talks about training everyone in lean methods and concepts, small manufacturers say, “Everybody around here is already wearing three hats. Who has the time to conduct or attend all this training?” And when the lean literature talks about . . . well, being lean, small manufacturers say, “We’re already lean. Remember that part about everyone already wearing three hats? Maybe big companies have extra people around but we don’t.”
Lean isn’t applicable to small manufacturers? Define small. Less than 250 people seems small to me. My blogs last week about Milbank and Flextronics showed how small manufacturers are using lean thinking well. They are just a couple of examples.
This author is taking make what the customer wants a little too literal. Of course companies are making products that sell, but they make too much of it. If the customer wants 5 then make 5 and not 10. That is big aspect of making what the customer wants, but not the only aspect. I have seen many small manufacturers make too much at the wrong time. The lean thinking helps with focusing on the customer.
The real insight is when the author talks about wearing too many hats. Lean doesn’t want people to wear more hats. Lean wants people to wear different hats. Think differently. Manage differently. Behave differently. Not an addition to what they are already doing.
Here is more:
The value of lean tools for small manufacturers lie, not so much in their cost cutting potential, as in their potential for creating agility. A company I know has promised several of its largest customers that it will keep a month’s worth of the products it needs in the warehouse at all times. In other words, the vendor has promised the customer that it can order a month’s worth of any of the products it uses with no lead-time. If this weren’t challenging enough, the customer will sometimes order a full month’s worth of several products, then order another month’s worth of those same products within a week or two. And if all that weren’t challenging enough, the sales office often promises similar service to lesser customers. If this company implements lean, hoping for “promised” cuts in payroll, improvements in efficiency and reduced costs elsewhere, it’s missing the largest strategic use of lean: the ability to meet customer service demands while keeping inventories as low as possible. In fact, it might actually go the wrong direction if the initiatives the company takes to make it “leaner” actually diminish service. This company needs agility, the ability to meet the sometimes capricious and unreasonable demands of customers each time, all the time.
This really shows the lack of understanding or the blatant attempt to sell “agile” versus “lean”. Lean is not a set of tools. Lean is about the way we think and behave. There are tools to help people change the behaviors and make problems visible, but it is not about the tools. The first thing the author jumps to is lean as a way to cut cost. The example he uses about the inventory is completely wrong. Lean would never say lower your inventory so low that you are never serviceable. The inventories should be as low as possible to expose problems but at the same time not allow you to be unserviceable to your customers.
What’s the small manufacturer to do? Focus on manufacturing cycle times, inventory levels and customer service rather than cost cutting. Focus on improving efficiencies as a path toward operational excellence, not as a move toward labor cost reductions. Understand that smooth, consistent flow of information and material is more important than occasional bursts of speed. For products that have long lead-times, ask, “If we could reduce the lead-time to the customer for this product, would we realize an advantage over our competitors, even if the cost of making that product stayed the same?” Where lead-times are short because you are keeping product in the warehouse (as in the case above), ask, “Can we maintain or even improve customer service even as we reduce inventories?” All that said, make sure you know what your inventory buffers are costing you. What could the company above save in inventory if it were to ask the customer for one-day lead-time? Two days? The company may or may not decide to make changes to its promises, but it needs to know what the costs of those promises are. (This may seem to contradict my earlier statements, but giving the customer a shorter lead-time than it needs is as wasteful as keeping inventory on hand to meet a short lead-time. The company mentioned earlier sometimes risked providing poor service levels to large customers that very much needed a very short lead time in order to offer equal terms to much smaller, less frequent customers that may have been willing to have a one or two day lead-time.)
EXACTLY!!!! This is exactly what lean thinking would have a manufacturer of any size do. I couldn’t have said it better myself. The issue I have is in the next paragraph he calls this agile with the use of lean tools.
Does a focus on agility rather than cost cutting require different “lean tools”? No. Workplace organization, quick setup, work standardization, pull systems, error proofing are very much a part of agile manufacturing. If anything, their connection to agility is more intuitive and straightforward than is their connection to cost cutting. (I’ve often had looks of disbelief, not to say arguments, from supervisors and operators who I told we were reducing setup times so that we could do more setups. They couldn’t see the connection between more setups and good efficiency. When I explained the advantages of improved agility on customer satisfaction, they got it.) On the other hand, a focus on agility does require a different strategic view on the part of leadership and a great deal of discipline on the part of supervisors and operators. It requires everyone to see lean initiative as a “top line” (better sales) strategy as contrasted to a “bottom line” (lower costs) tactic.
This article really got to me. I believe the author has the right thinking of how manufacturing should be done. Lean is about flexibility and agility. But going against lean with lean? It really seemed like a way to make money by dressing lean up in a different dress and then trashing the old dress to feel good about yourself. The odd part is the consulting group the author works for promotes lean and does lean training. So do they understand lean? What is their training like? I am confused by this one.
Am I off base? What are your thoughts on this?
Company Background / History
Milbank Manufacturing is a 3rd generation family owned and ran business. It was founded in 1927 by Charles A. Milbank. The 1920’s was a rough time to start a business but with the philosophy to provide their customers with high quality products at a fair price in a timely manner and Charles’ network of friends and determination, Milbank built a strong base of customers. Today, Milbank is the industry leader in the manufacturing of electrical meter sockets.
Milbank provides wholesale electrical distributors with quality electrical products for the utility, contractor industrial and OEM markets. Their products are divided into three platforms: Core Products (primarily meter mounting equipment and pedestals), Commercial and Industrial (electrical enclosures and commercial meter pedestals), and Power Generation (standby generators and wind turbines).
Milbank has over 500 employees and four manufacturing facilities (Kansas City, MO; Concordia, MO; Kokomo, IN; and El Dorado, AR). This post focuses on the lean efforts and success of the Kansas City, MO manufacturing facility and the Plant Manager that lead the transformation process during the last 6 years, Mr. Trace Tandy.
Trace Tandy’s Background in Lean
Mr. Tandy is currently the Vice President of Manufacturing for Milbank. His first exposure to the concepts of Just-In-Time manufacturing ocurred in the late 1980’s while working for a Tier 1 automotive component supplier. He joined Danaher in 1990 where he learned the Toyota Production System from the Shingijutsu Co.,Ltd. consulting company. Later that decade he had the opportunity to receive further training and development in the Lean principles through the Toyota Supplier Support Center (TSSC). Mr. Tandy has lead nine manufacturing sites through the Lean transformation process with the most recent site, Milbank’s Kansas City plant, winning the TBM Consulting Group’s 2010 Quest for the Perfect Engine Site Award.
How Millbank Started It’s Lean Journey
Elements of Lean manufacturing or similar philosophies had been attempted between 1998 and 2004 with little or no sustainment and with no evidence of a plan. In 2004, Milbank re-engaged with a commitment to the Lean principles on an enterprise-wide level. Milbank partnered with TBM in 2007 and began using Lean Sigma tools, including Shop Floor Kaizen Breakthrough (SKB) and Business Process Events (BPE) and later, the policy deployment x-matrix process. Employees at the shop floor level became more engaged in the improvement process and there was an unwavering commitment from top management to truly transform Milbank using the principles of Lean.
Results from Lean Efforts
Before the lean efforts, the manfacturing in Kansas City was spread across two buildings plus a third that was used for warehousing. Now everything is done in one building. Using the Lean Sigma methodology during the couse of 2007 – 2009 they were able to:
- Completed 38 SKB / BPE kaizen events
- Created a 3 year plan / vision for consolidation of the two Kansas City manufacturing sites
- Implemented a policy deployment process based on the TBM x-matrix
- Implemented a War Room / Managing for Daily Improvement (MDI) process
- Implemented visual management systems such as Leader Standard Work, Maintenance Scheduling, etc…
- Implemented U-shaped, one-piece-flow assembly and fabrication cells
- Implemented visual scheduling / shop-floor-control systems eliminating the use of MRP in many areas
- Reduced floor space utilized by over 47% (60,000 square feet of manufacturing space opened up for future expansion, no brick and motar required – eliminated the need for a 30,000 square foot remote storage facility – property was sold)
- Reduced lead time by almost 53% (reduction of 30 days)
- Improved stock availability from 90.6% to 95.6%
- Improved sales order on-time performance by nearly 50%
- Reduced FG inventory values by over 50% ($2.42 million in cash generated)
- Reduced WIP inventory by 83% ($1.14 million in cash generated)
- Improved FG Units / Employee by 12.3%
- Implemented annual cost reductions averaging $1.22 million
Milbank will not tell you they are done. In fact, they have plans laid out to improve even more over the next few years. Their mindset is to keep improving and never be satisfied.
As you can see Milbank Manufacturing is a great example of how lean is helping manufacturing in America not only stay viable but become the industry leader.