Outsourcing

I am going to have a very big rant and compare the poorly thought out short term strategy of outsourcing manufacturing overseas to the likes of China with what I believe are the sustainable long term gains that can be attributed to implementing lean manufacturing!

Now I am not talking about companies that outsource non-core services such as their HR and IT support, I am talking about the companies that have outsourced much if not all of their manufacturing and have become nothing more than a warehouse stocking products.

Consider what has been happening now for some time in the western world, manufacturing companies in a drive to cut costs have been out sourcing their production to China and other low cost economies in the perception that costs will be reduced. The costs are reduced for a number of reasons, the wages are lower, capital costs are lower, taxes are lower, regulatory costs are lower and in many cases incentives are offered to bring the business. Many companies seem to be doing this with little thought of the true costs, merely following the rest of the flock without any real investigation into the true costs to the business.

The reasons behind it depends on the industry and the company, for some it is a strategy for survival, their competitors are a lower cost therefore they have to take advantage of this “easy” way to reduce costs to compete, for others it is purely an opportunity to improve profit, reducing costs without reducing price to the consumer!

Companies are not moving production there to take advantage of the markets there, they are on the whole moving production there to have it exported back to us here, our countries losing the wages and the jobs, our countries losing the taxes earned, our countries having to pick up the social costs for the now unemployed. So instead of these companies contributing to our economy they contribute to the economies overseas at our expense. How will this increase in social costs and reduction in earning be met, through higher taxes both personal and business and governmental borrowing costs?

Consider comparing what is being done here on a large scale to the principles of lean; how does this mass outsourcing of the western worlds manufacturing capability compare to lean? Let us just consider what we are doing purely to start with against some of the “seven wastes”.

Let us firstly consider the kings of all the wastes Overproduction and Inventory; we are moving production so far away from the customer that the company cannot produce using Just In Time principles, they can only forecast and push production in large batches through the facilities overseas. This overproduction is now vastly more exaggerated due to the longer time scales involved and the greater distances and greater number of variables that could impact on the supply. This leads to the company having to invest greater levels of cash into a vastly increased inventory, either from it’s own reserves or through borrowing, either way it is costing the company extra money which may not be factored directly in comparing the costs. In addition to this there will be the insurance costs for this when shipping, and possible losses due to currency fluctuations.

Transportation, an obvious waste in this situation, we now have to transport these goods, generally by sea for the bulk of the journey and truck and rail between the ports. Most companies feel that this cost is covered by the reduction in production costs, but what is the effect of the ever increasing fuel costs? How much does fuel have to increase by to make the cost of transportation too great to make the manufacturing cost cuts viable? Added to that the increasing costs of insurance and other taxes, all of which are rising. Plus the impact on the environment, all of this transportation generates good old carbon dioxide to add to global warming (or maybe not depending on your viewpoint) as well as releasing other pollutants to our atmosphere. There are many taxes and other costs associated with these pollutions including health care costs.

The waste of waiting also becomes an issue, how many businesses do you know of that have outsourced to china that suffer delays, delays in delivery, delays in getting information back and forth, delays due to misunderstanding of language and distance. How many times have you heard about products being held up in customs for weeks, delayed due to bad weather out at sea? There are so many things that can cause delays to you receiving goods, either for sale or for further assembly. Hence the reasons for increases in inventory to overcome these possible delays! Lean manufacturing is generally more about reducing the time line, if you implement lean you will be reducing your lead times and removing these delays.

Defects, a problem that I hear about frequently, outsourced products are produced on the whole by inexperienced, poorly paid, poorly motivated workers using basic simple processes. Defects are common, generated by both the workforce and misunderstandings in requirements due to language and distance. These defects when discovered can have a major impact, unlike a simple flow line here where a defect when discovered may impact on a handful of products, defects may impact on many months of produced product. All of which will require inspection and possible rework, a major cost and source of delay. This problem has actually become big business for a couple of engineering companies that I know of, they have lost their normal production to lower cost producers in China, but now the same customers and others pay them to rework the defective products from china at a higher rate than they originally made them! This with increasing design work generated for them due to the difficulties of prototyping over such long distances has helped them to grow!

Defects and rework does not just affect the manufacturing industry, consider the issue of Indian call centers, how many dissatisfied customers spend their time trying to find home numbers to discuss their issues with someone here rather than discussing it with the call center worker who can’t understand their issue or their accent. How much time do companies spend “reworking” these customer issues.

The defect issue is not one that will quickly go away, especially where the work force is paid very low wages and has poor conditions. I have worked for some time in Saudi Arabia and have been inside many manufacturing companies here. The workers within these companies are all overseas workers from the likes of India, Bangladesh, the Philippines etc. and are paid very low wages and kept in poor conditions. They have no loyalty for their company, no incentive to do a good job, no reason to help the company improve and grow. There is no sign of Lean Manufacturing principles in use here, if they have a problem they just throw more cheap labor at it!

The next waste that I will discuss is not one of the original seven, but it will probably have the biggest long term effect on our economies, the waste of Talent / Knowledge / Capability, call it what you will. We are losing both the knowledge and skills required to do these jobs along with the various pieces of tooling and machinery. The costs of re-entering some of these industries is becoming increasingly higher, if we want to bring the jobs home the costs will soon be beyond us! What happens as the cost of living in these countries starts to rise, as peoples wages increase close to ours in the west as they will. It may take a “few” years but the costs will rise and the savings will disappear and we will all either be looking to bring production home to cut out the transportation costs or transfer it to the next low cost economy, maybe Africa? If we are constantly sending our production overseas how long will it be before we are the next low cost economy?

As to moving production to the next low cost economy, why do you think China is now spending so much money helping various African countries develop infrastructure and opening new companies and joint ventures to exploit various natural resources. When it becomes time to move to a lower cost economy, it will already be controlled by China!

Maybe I am getting away from lean a little here and getting a bit political but we need to consider the full impact on our costs, if we damage our society and our economy the costs get passed to each and every tax payer and business. If we had managed these businesses on lean principles rather than going after the short term gain in profit then we could have kept these industries and jobs here by making improvements in our productivity and so on to reduce costs. Manufacturing creates wealth, you export a product overseas and you earn money to the economy, if you import a product you deduct from our economy and add to the other. Service on the whole is just recycling the available money in the economy.

We must maintain our manufacturing to survive, outsourcing our production wholly or partly overseas is a short term profit strategy that will eventually cost more than it saved to both the business involved and the economy as a whole.
I am going to repeat what I said, Cost savings through outsourcing is a short term saving! Implementing Lean manufacturing principles is a long term approach to the problem that will satisfy the customers not just the share holders, lean is the long term sustainable approach that we need! So go implement lean, tell your friends, lobby your politicians, do it yourself, but do it!

Just In Time Manufacturing Case Study 2|JIT

The following case study regarding Just in Time and lean manufacturing is not as “sad” as the last as it was eventually a successful implementation. But I will give you some history regarding how the company “played” with lean manufacturing over a period of a few years before entering into a crisis situation which forced them to change.

The company in question made luxury office furniture, they offered a vast range of products in a number of different colors and finishes. They had been in operation for around 20 years and were reasonably successful, owning probably the biggest factory in the town in which they were located.

I became involved with the company when they contacted the local university for help in downsizing their company due to turndown in demand. They needed to reduce the space taken up by their operation as they had another company that was offering to take over half their factory space for a substantial rental fee.

They had lost a significant portion of their business to local (UK) competitors over the previous year or two, much of the business going to three separate companies that had been set up by previous directors of the company in direct competition. The perception being that these ex-directors had stolen the customer base. This led to a number of redundancies and to the obvious conclusion that the factory was now far too large for the size of their operation and they should either move to smaller premises or rent out a portion of their current location which was owned by the company rather than rented.

They had used consultants in the past to implement lean manufacturing to improve their business with some success. They were happy with what they had done in the past as it had generated some savings but they had never really realized the gains that they felt they should have been able to achieve and as such had ceased to actively pursue lean.

On visiting the company the real reasons for the down turn in business became evident, the competition was offering lead times of two to three weeks, whereas the company that we were in was struggling to meet six weeks. The customers were mainly asking for “next week” delivery, so they were far from this requirement.

The company knew that lead time was a major issue but had not managed to successfully tackle it over previous lean implementations. They were also hiding behind the “previous directors stole our customers” banner rather than accepting the real issues.

The first lean implementation was factory wide, they implemented 5s with some success, the factory was on the whole tidy and well organized. Shadow boards and tool racks were evident at each machine and so on. They also tried to tackle waste within the factory, at the time the biggest issue was the movement of inventory, which was also a health and safety issue due to a serious accident with a fork truck.

As you can imagine, office furniture is made up of various cut wooden panels and other components, these when produced in batches create some significant amounts of cut, heavy material, which at the time had to be moved from process to process using fork trucks. This was “resolved” by the company installing a network of what can only be described as rail tracks and trolleys that could be maneuvered through the factory from process to process. They managed to make the biggest waste in the factory more efficient rather than trying to eliminate it! This actually produced some savings to the company and was felt by those involved to have helped reduce waiting times as people were in control of their own material rather than waiting for the now no longer required fork trucks.

Their second foray into lean was to re-hire the same consultants with an aim to reducing the overall lead time, this was achieved in part by re-organizing and laying out the final assembly line. This was actually quite nice and was felt to have shaved about a week off of the lead time. The line was a well designed flow line with materials entering from sides where they were required and 2 bin Kanban systems for the smaller items used on the line.

But none of this achieved the lead times being asked for by the customers, it also did not satisfy the overall aims of Just In Time (JIT) or of Lean Manufacturing. They were still making larges batches of products that were then pushed through the factory rather than making what the customer wanted when the customer wanted it!

Investigating the planning and flow through the factory we found that the companies ERP system was also set up to build in a weeks long delay between each process to allow for any problems with delivery, quality or machine availability. They were actually planning a long lead time!

This is a common problem with ERP, MRP and even some “manual” planning systems that they are set up with these delays between processes to make the planner’s job easier as there is stock and flexibility within the system for the shop floor to continue easily without making too many adjustments to the plan when problems occur. The outcome however is that the lead times through the factory are made even longer!

The machinery was all modern and computer controlled within the factory, setups were a matter of pushing a button and a few minor material changes when required. They were not a barrier to reducing batch sizes as they are in some factories.

The main saw could cut each and every panel for any product at the same time rather than cutting all table tops then all drawers etc. This was actually a very simple implementation!

We designed the layout with the operators and supervision, a very simple highly compressed layout. We then planned the moves over a number of weeks before the main shut down so that we could move equipment piece by piece. We had several weeks of inventory to run through the system, so we were able to move the first few processes closer together whilst the later processes were still running.

The planning was drastically simplified, customer orders modified for only board cutting efficiency were given to the saw to cut – this meant that at the most we ended up with only 2 or 3 additional products for stock rather than the usual 30 to 40. (Plans were in place to review available board sizes to prevent even this.)

The saw then cut in the order they received the paperwork, these customer orders were then placed in one of the only 4 possible locations between the saw and the next process with a numerical flag sat on top so that the next process took the oldest order.

The next process took the oldest order, did the work they were required to do then placed the order into the limited spaces between it and the next process and so on. If there was no space, no work was done, the operators were instructed to go and help in other areas, normally the next process.

In this way the order flowed through the factory in less than 2 days! Yes 2 days from the initial 6 weeks that they were quoting and not meeting! Business increased due to customers no longer trying to go elsewhere to get a shorter lead time. This is Just in Time, this is lean manufacturing in action!

The space in the factory was a fraction of before, even with an additional assembly line installed to cope with additional demand. The finished goods stores slowly began to reduce to a mere shadow of its former “glory” as the remaining slow moving stock was shifted. Half the building was rented out as per our original request for help!

This took around 6 months to implement fully from the initial visit to a fully working system led by 3 experienced consultants. I don’t have the monetary savings that were made by this project as the company never released them to us but they were considerable.

Just in time is a major part of implementing lean manufacturing, focusing on giving the customer what they wanted, when they wanted it rather than looking for individual wastes to eliminate gave the company the revolutionary change that they required.

Just In Time Case Study

I want to emphasize the need to implement the main principle of lean, the need for Just in Time (JIT) manufacturing. The need to define value and make it flow at the pull of the customer. Look back at my previous post how to implement Just In Time for an explanation.

Do you want to wait till your competitors achieve this while you sit there with an unresponsive factory offering lead times of many weeks while they can offer a lead time in days. Do you want your hard earned cash tied up in masses of stock that you will take months to sell and then have to invest it back into masses of raw materials and work in progress to produce more slow moving stock, while your competitor enjoys his cash?

I want to show you how a new viewpoint is required through a couple of examples of companies that I have been into over the years that I worked as a consultant. The following example is quite tragic and a real waste!

I visited a factory a few years back, a long established manufacturer of “traditional” board games and similar products such as puzzles, art and craft sets, painting by numbers and the like. At the time I was working on an initiative sponsored through the UK department of trade and industry and this company had phoned looking for a grant to fund new machinery. Whilst we did not have grants to hand out I suggested that it may be possible to free up the required money from the business and that I should come take a look. They were looking for about GBP30,000 for a business with over 2 million turnover.

The company was located in the middle of a large town in a magnificent series of very old building that were over 150 years old, they employed over a hundred staff and supplied direct to toy stores and other companies across the UK and Europe.

The company had a huge range of products, many hundreds of variants that they supplied from stock held in the largest part of their facility, the products themselves were assembled on simple production lines which basically selected all of the required components and placed them into the required packaging. There was a limited amount of injection molding to produce plastic game pieces, most component parts being brought in.

I spent time watching the operators assemble the games and other products, selecting the components, forming the boxes and packing and shrink wrapping them. The process was very simple, the lines did not take long to set up and all components were close to hand, each “line” was run by only one to three people and each “box” was swiftly filled and wrapped. There were a number of spare lines that were being kitted up for production that the operators moved onto when they were finished with the product they were producing.

The other half of the business concerned order fulfillment, operators took lists of orders from the many customers and worked their way through the many rooms of the warehouse to assemble the specific customer orders, generally a small pallet of products comprising 20 to 30 different products of single figure quantities.

Now some facts and figures regarding the operation to illustrate some issues, the turnover of the factory was a little over 2 million UK pounds every year, a figure that was declining due to competition in a price sensitive market. The business was operating at a loss! Stock holding of finished goods was almost 2 and a half million UK pounds, over a years worth of stock sat in the warehouse! Each year the company wrote off around 5% to 10% of this figure as being obsolete.

This in itself is horrific, the company holding so much stock as they felt that they had to have their entire range available to be able to satisfy orders rapidly. Indeed the customers expected next week delivery which they always achieved. So maybe this was necessary to achieve the market need for prompt and full delivery. But then consider the next set of “figures”.

Whilst I was watching the production processes I carefully timed each product being produced, each one took barely a minute to complete, the production operators making up around 40% of the total staff of the company. I then timed how long it took the warehouse staff to find and palletize the products that had been ordered, surprise surprise, they took longer to search through the various stacks and boxes of products across the various rooms of the warehouse than the production people took to produce them, a considerable amount more time, almost twice by my very rough timings. Around 50% of the staff were employed in the warehouse, the remaining 10% being employed within the offices. Remember my previous posts on manufacturing wastes?

I am sure that you can see that with a little organization it would be quicker to assemble the product to order than it would be to find the specific variant of the product in the stores, collect it adjust the stores figures and palletize it.

I could see that the company could do this very easily, they had many hundreds of variants but only about a dozen main products that would lend themselves to being set up as simple one person cells, instead of picking from stores, they could just go from cell to cell completing the required product as ordered, simple!

The owner confided that although the many customers liked their products there were many cheaper products on the market and that although some of the other suppliers were less flexible than they were, the customers were having to purchase elsewhere to get the reduced prices. The business could not afford to reduce prices any further as they were already making a loss and needed to rapidly cut costs. They were considering making redundancies and were fearful that they would have to close all together.

The answer was simple for this business, make to order! Shut down manufacturing, clear the stock, recoup the cash tied up. Then start to make what the customer wants when they ordered it. This was a business in crisis, they would have to shed jobs to survive, but once re-organized with a different production model they could hopefully expand their market share beyond what they had and re-hire workers. But they had to take action now or they would lose the business, it was that serious.

I hope that my explanation above is enough for you to see that Just in Time and lean manufacturing was the solution for this business, that they could save a significant portion of their costs and hopefully enable them to survive if not compete healthily.

The owner of the business was in his late seventies, had always run the business in this way, and his belief was that the only way to survive in the industry was to supply from stock and their superior range of British built products would help them survive. It did not matter how many ways it was explained to him, how many diagrams and graphs were drawn, how many additional people I brought to visit him (I made several subsequent visits to try to persuade him), he would not and could not change his mind set. His senior management were convinced, the staff were convinced as even they could see where the business was heading, but he was the owner and he was in charge, and in true old school traditional management style, ”into the valley of death rode the ....”

Unfortunately this business closed less than a year after my first visit with the loss of around 100 jobs, this business could have been saved and would have been able to grow if they had embraced the ideas of Just In Time and Lean Manufacturing. The owner was upset at the loss of the business but owning one of the largest pieces of prime real estate in the center of town he was consoled by the massive profit made when it was sold.

Agile Manufacturing Vs Lean Manufacturing

What is Agile manufacturing and how is it different from lean manufacturing? Agile is promoted as being the next step from lean, creating an organization that is fit and athletic; able to respond to a rapidly changing market place. Whilst lean is seen as a process by which an organization goes through a process of waste elimination to the point where it is able to efficiently produce a product time after time, but quite frankly is anorexic and unable to adapt to changes in demand.

Agile has in my mind appeared as an alternative philosophy to lean to escape from the poor perception that has blighted lean with regards to this “anorexic”, “sick” result for an organization. The typical lean implementation focuses inwardly on the organization, looking at waste elimination to the point of having a process that produces product that has minimum cost, but lacks flexibility. Thus the organization is unable to respond when there is a surge in demand or any other changes in the market place.

But is this really what lean is about? If you read the definitions of “what is lean” on the various websites of the many consultancies promoting lean, you would think so. They are on the whole selling a “quick fix”, reduction in costs program to companies, working on corporate greed to sell their services. After all, if they can reduce your costs on your main product line by 20% to 40% would you not at least listen?

These implementations often succeed in the short term, making impressive savings and improvements, but begin to revert to the old process as time passes as each subsequent problem hits and is tackled by putting back labor and reinstating old processes. Thus the perception that lean is not sustainable and quite frankly is only fit for cost saving initiatives in a mass production environment.

But this is not what lean is meant to be, the main focus of lean is not to look inwards at the companies processes to eliminate and reduce waste. Lean is about value, value as perceived by the customer. You must define what the customer values in your product and service, actual features, actual price, actual time etc. You must then look at the whole value stream from raw materials to use by the customer and try to make that value flow at the pull of the customer. Then you strive for perfection, continually improving everything that you do, continually adapting your processes using the companies greatest asset, its people.

By focusing on what is valuable to the customer you design a product and process that automatically eliminates and reduces waste. A value stream that flows requires that you remove delays and inventory. Thus reducing your costs and improving profit continually whilst remaining focused on customer needs.

If the customer requires that you are able to quickly adapt your product designs, then you design your processes to suit, if the market demands that you be able to produce product at short lead time then you design your process to be able to comply to their needs. You meet what the customer needs, is this not Agile? In my mind agile is just a rebranding of a tarnished reputation for lean that has been brought about by people trying to make quick gains without really focusing on value to the customer.

What is Lean Manufacturing

How to implement lean manufacturing is my first attempt at a blog and as such I have spent a little time on the internet just trying to refresh my own mind as to “what is lean manufacturing” and quite frankly what I have read explains to me why lean can end up with such a bad reputation.

Why do I say that; because lean is not just the removal of waste! I think most of the definitions of lean that I read major on this one small part of lean. If all you do is focus on this then it is no surprise that people’s perception is that lean is all about cost cutting and removing people from the workforce to the point that the business has no flexibility. Lean is not Mean!!

This approach to implementing lean is wrong, yes you can get some good short term gains by taking this approach but they will not be sustainable and it will not help you to meet your customer demands in the long term.

Lean is more than waste reduction, waste reduction is something that happens when you focus on achieving what your customer wants, not what the board wants for the business; reduced costs! In my mind this is why so many lean implementations fail or are so badly supported. The company instead of focusing on the customer focuses on reduction of internal costs through waste reduction only. This looks like lean on the surface but they are approaching lean from their own need to reduce costs rather than their customer’s needs.

The company goes after the quick gains, making cost savings by cutting out people on the factory floor and not focusing on what the customer wants. This generally leaves the company anorexic rather than lean, when that rush order comes or they have various problems they can’t cope and customers are let down. “We tried lean and it wasn’t for us!”

The first step of lean implementation is to identify value – in the eyes of the customer! Value is only meaningful when you express it in terms of a specific product or service which meets the needs of the ultimate customer at a specific price and a specific time. Not just looking at where you are spending money and looking to reduce it!

Then you need to create value streams, how do you get from raw materials to the ultimate customer. Then make that value flow at the rate the customer needs it without being delayed or caught up in inventory.

Build at the demand of the customer, pull production through your factory rather than push unwanted inventory through it!

Then strive for perfection, not just quality, producing exactly what the customer wants when the customer wants it at a fair price with the minimum of waste. This is how to implement lean manufacturing, not just focusing inwardly to reduce costs by removing waste.

Think about it; If you only produce products with the features that the customers want then you are already simplifying your design, if you can define the value stream and make it flow at the customers requirement then you are removing all of the wasteful steps in the process (The whole process, not just a couple of work cells, how often is the delay from an office process?). If you have your work force focused on continual improvement then you will continue to improve your ability to satisfy your customer.

Focus should be on Value to the customer, not on the selfish reduction in internal cost and improvement of profit! If you focus on value then the improvement in costs and reductions of waste will appear as will the improved profits, but they will be sustainable, enabling your business to flourish rather than just survive.

Seven Wastes|Eighth Waste

In previous posts on how to implement lean manufacturing I have been discussing the seven wastes, as in all lists it is necessary to add one or two after the original number. So in the tradition of the forth part of a trilogy and the 102nd of the 101 ways I will present to you the eighth of the seven wastes – and maybe even throw in the 9th and 10th.

Generally accepted as being the eighth waste is that of the waste of Human Talent, not using all that your wonderful staff can contribute to your business. How many businesses neglect to ask their employees how to improve the business, after all what would they know? They have only worked there for the last generation or two between them and have seen every up and down that the business has to offer as well as their life time experience – what would they know?

Well, they probably know a lot more than you! Combine all of their thinking power and they will know an awful lot more than you – so use them. It does not matter what business improvement technique you look at, it will talk about team building and using your biggest asset, that of your people, don’t neglect them, you do so at your own peril.

Not only can involving them help you to find quick and often simple ideas to improve your business but the mere act of involving them will make them feel like a far more important part of your business. Don’t you want your staff to be highly motivated and working for the benefit of the business, or would you rather they hung their brains next to their coats when they clock in?

From quality circles to employee councils or just simple suggestion schemes companies need to use their people, this is how to implement lean manufacturing. Who knows best what really works in your business, it is the people doing the actual work!

To top up the list of wastes in today’s climate of being environmentaly friendly, we can also include the waste of Energy and the waste of By-Products.

The waste of energy being exactly as it sounds, forgetting to switch off all the lights and machines when everyone leaves for the weekend is a fairly obvious example of this waste. It costs us money at zero benefit to the business, so why do it, and why do we do the same at home also? But also look into more depth into your processes, can you replace some of your equipment with more efficient versions? Are there motors and pumps out there that use less energy for the work being done? Maybe more expensive initially but working out much cheaper over time when you add in their lifecycle costs.

The waste of By-Products, can you use your “waste”? The little offcuts and sawdust from your furniture business; how can you utilize them? Or would you rather pay to have it all taken away and sent to landfill? Could you burn it and heat your factory, or even generate your own electricity? I know of more than one company that does exactly this, one that actually generated more energy than it consumes and sells it back to the grid. What could you do with your by-products?
Well if you are learning how to implement lean manufacturing and you have been reading about the seven wastes here and can think of some additional wastes to add to the list feel free to leave a comment. Use this link for a full list of wastes for waste reduction.

Seven Wastes|Waste of Inventory

In a previous post on how to implement lean manufacturing I discussed the seven wastes, within this post I will discuss the waste of Inventory. The build up of stock and work in progress that fills our factory floors and our warehouses.

If you wish to learn how to implement lean manufacturing you must try to get as close to single piece, just in time flow as you can. Producing what the customer wants when they want it. Today many of you will be looking at your factory and saying that you cannot ever achieve that, but as every advance in technology arrives and every little thought occurs to your operators and engineers you move that little bit closer to achieving that ultimate goal.

I am sure that the book printers never thought that they could print just one copy of a book as requested by the customer, but the technology now exists in a number of large book stores across Europe and the US. The customer can select the title he wants and the machine prints and binds the book of his choice while he waits (sorry another waste – but the customer could always do his other shopping while the book is printed.) This eliminates all of the wastes associated with the keeping of inventory.

A few years ago I went to a manufacturer of board games in the UK, they were looking for a handout from the government to purchase a new machine to help their struggling business. At the time I was working for the Department of Trade and Industry providing help to manufacturers in the UK, and although we had no grants available I suggested that maybe it would be possible to find some way to free up the required money from the business.

I walked around the business and was shocked at what I saw, the business had been in operation for over one hundred years, an old established family run business, but it was filled with inventory. Over half the factory was filled with stock, finished packaged games. Over half of the people were employed moving around the seemingly randomly arranged warehouse picking orders for toy stores around the country and overseas.

I spent time in the manufacturing area and the stores and tried to consider how I could remove the need for so much inventory. The cost of which was in excess of one years turn over of the business, and I also discovered that not only was a whole years turnover invested in the stock but they also disposed of five to ten percent of this every year as it became obsolete or damaged. But the management felt that the only way to satisfy their industry was to supply from stock as they have done for many decades.

I used my watch to time the various operations in the company (not overtly I hasten to add; most people do not like someone standing over them with a watch), the results were a shock, it took longer to find and pick the product from stock to ship to the customer than it did to manufacture it and put it into stores! The company could manufacture faster than they could pick stock!

The company was cash starved and needed a fraction of a week’s turnover to purchase a new machine (to make more inventory), but tied up over a years cash in inventory, and that was just the finished stock, not the component parts for the manufacturing. This was hardly how to implement lean manufacturing.

The factory could afford to close it’s manufacturing for the next year and still supply it’s customers, then turn from supplying from its inventory of finished products to producing to order. The company would have half the people and need half the space, or if there was demand they could use the staff and space to increase their turnover.

They had no idea how to implement lean manufacturing techniques, or that they could do things differently than they did. Unfortunately trying to persuade the current owner of the business in his late seventies that he was doing it wrong was like trying to keep the tide out, it did not matter how many diagrams were drawn or figures computed, he had to have his inventory – the factory closed one year later with everyone losing their jobs because they could not compete.

So many companies have inventory because they think they need to have it, they use it as a buffer to hide all of the other real or perceived problems in the factory. The inventory allows them to continue if they have quality or reliability issues, but does not force them to tackle the real problems.

Inventory is often depicted as the sea, with all of the problems of the business being submerged rocks on which your ship of progress could be wrecked. As you lower the level of inventory you have to tackle each of these rocks before you hit them, be that your long lead times, reliability or quality problems or whatever else you are hiding beneath the inventory.

Lean manufacturing as we know it has mostly come from the Toyota Production System (TPS), the engineers there would lower the inventory levels regularly, or remove people from the system just to uncover these rocks. Tackle the problems that were uncovered and be left with a more efficient cell (I am sure the operators probably shuddered every time they saw the engineer approach the shop floor, knowing what was about to be done!)
The waste of Inventory is probably the biggest waste of all when you are learning how to implement lean manufacturing due to it’s ability to hide every other waste. I will post another case study shortly to highlight this. Use this link to go to the full list of wastes for waste reduction.

Seven Wastes|Waste of Overproduction

In a previous post on how to implement lean manufacturing I discussed the seven wastes, within this post I will discuss the waste of over production. One of the most serious of the Seven wastes which leads to the waste of inventory.

The waste of over production is caused by producing more than is required or producing what is required faster than you need to. Why do we do this, generally because of the usual problem of oversized batches, poor scheduling, and poor balance of the processes causing one process to produce much faster than subsequent ones leading to build ups of work in progress.

But why do we use such large batch sizes? We use these excessive batch sizes because of the need to overcome other perceived problems within the factory. We use them because the setup times on our super machine are too long and we want to utilize the time available to produce parts, not in frequent periods of non-productivity caused by the setups. Why not use the technique of single minute exchange of die (SMED) to reduce the setup times rather than ignore this waste of waiting! I will discuss the application of SMED in a later post on how to implement lean manufacturing.

Why else do we use large batch sizes leading to the waste of over production? Well there are many reasons, but generally it is because of all the other wastes within our system that we try to insure against. We over produce just in case the machine breaks down tomorrow and we can’t keep the rest of the factory moving. So rather than deal with the problem of unreliability we hide it under a sea of inventory. Use techniques such as total productive maintenance (TPM) to tackle the problem of unreliability. We don’t trust the quality of our products so we produce extra to account for the defects that will be produced. How many companies have you worked in that always add a specific percentage to every requirement to allow for defects, this percentage being multiplied back in the process until you end up building twice as many of the initial assembly or component than you actually need!This is hardly how to implement lean manufacturing, hiding all of your problems rather than tackling them.

We plan to build to much because of the problems above, we perceive and worry about these problems and try to overcome them by building more than we really need. This often leads to us planning to not just build too many products but also planning in massive delays between processes to enable batches to be moved about, quality problems to be dealt with, waiting times to be overcome and so on.
When learning how to implement lean manufacturing we need to make the value flow at the beat of the customer, not produce at the rate we feel we need to overcome all the problems we have. Tackle the problems not hide them by implementing the waste of overproduction, one of the greatest of the Seven Wastes. Overproduction is a choice not a necessity. For a full list of wastes use this link for waste reduction.

Seven Wastes|Waste of over processing

In a previous post on how to implement lean manufacturing I discussed the seven wastes, within this post I will discuss the waste of over processing. Wasting time and other resources doing something that adds no value to the customer.

What does this mean? Sorry to Rolls Royce for using the following example but it is probably one of the most frequently used examples, why polish the rotor blades of the engine where it does nothing for the function and cannot be seen! How often have you seen processes where they paint or finish areas of a product that never get seen and where it will have functional benefit.

Sometimes it is necessary to paint unseen areas due to the risk of corrosion, but is there a better cheaper alternative? Could you coat the material with a cheaper alternative, or use materials that were not prone to corrosion in the first place.

In addition to these obvious wastes, think about the functionality of your product, is it really adding any value to the customer or are you doing far more than he really wants? What is the point of having a refined top of the range suspension for use on perfect UK and US motorways and highways if the car will be driven on rough concrete roads with poor joins and multiple pot holes? Do you think that the ford car produced for the European and US market has the same suspension as that produced in India for the Indian domestic market?

Is it worth using an expensive computer chip capable of many millions of calculations per second if it will be utilized in a very simple application where a much simpler and cheaper version could be utilized. Are you defining tolerances of fractions of a mm where actually much wider tolerances could be allowed?

When implementing lean manufacturing we want to aim for perfection, but that perfection is what the customer values not more. Ensure that instructions and standards are clear to ensure that we do not incur the waste of over processing.

If you want to learn how to implement lean manufacturing, you need to not only think if each step in the process is adding value, but is that value required? Is that value in excess of what the customer needs?

In the next post about how to implement lean manufacturing I will talk about the waste of over production, one of the most serious of the Seven Wastes. Use this link to return to a full list of wastes for waste reduction.

Seven Wastes|Waste of Transportation

In a previous post on how to implement lean manufacturing I discussed the seven wastes, within this post I will discuss the waste of transportation. The waste of transporting the product from one location to another.

The waste of transportation is distinct from the related member of the seven wastes, that of motion, in that transportation is the movement of product from one location to another rather than the motion of the person or the machine.

This is commonly a major waste in many companies, moving of product from one area of the factory to another for the next operation rather than the next operation being adjacent minimizing the movement. To demonstrate the distances travelled within the processes, I once worked on a project to improve the efficiency of a company producing ground to air missiles! The missiles actually travelled further in the production process than they could travel when they were fired!

One of the things that you try to achieve when learning how to implement lean manufacturing is flow of product through the factory. The ideal situation within any process would be the product moving from one process to the next without any gaps or delays. You need to minimize the waste of transportation. Of the seven wastes this is normally a symptom of other wastes, the wastes of inventory and overproduction.

Most factories try to organize themselves into functional areas, one area for cutting, one for machining and another for assembly. This is a common set up within factories. Batches of material are cut in the first section, then palletized, stored then eventually transported on a fork truck to the next section. The palletizing, the storage and transportation are all waste, none of it adds any value to the product that the customer wants to pay for.

A better organization for the shop floor would be to organize the area into product lines using similar processes, that way the individual processes could be brought closer together to enable flow and reduce the transportation. If processes are adjacent would you need to produce large batches? If you don’t have large batches can you just hand or slide the product on purpose build racks to the next process eliminating the need for transportation?

So what we are looking for is the lean approach, which is that of a close coupled layout which enables one piece flow and eliminates the need for transportation.

So if you are learning how to implement lean manufacturing and you walk into a factory and see fork trucks and pallet pump trucks everywhere you look, you can be pretty sure that they have the waste of transportation as one of their seven wastes. For a full list of wastes use this link for waste elimination.

Seven Wastes|Waste of Motion

In a previous post on how to implement lean manufacturing I discussed the seven wastes, within this post I will discuss the waste of motion. This is the waste of time and effort due to any motion of the man or machine that does not add any value to the product.

This waste of motion has a long history of being documented, Frank Gilbreth a guru of time and motion from the time of Taylor specialized in this area. He highlighted the many motions that a bricklayer made when building a wall, the bricklayer bending down to ground level to pick up a heavy brick then having to bring it up to working height. This wasted time as well as having the potential to cause stress to the back of the individual involved. (He also was also the inspiration behind the “cheaper by the dozen” films but that is getting away from how to implement lean manufacturing, I am sure that you can find much information about him if you want to learn about his life and works.)

As already discussed earlier while we were writing about how to implement lean manufacturing, anything that does not directly add value to the product is waste, lifting the brick from floor to working height is not adding any value therefore it is waste. It is also a health and safety issue in many places, and with today’s society being heavily focused on finding blame for any problem and applying a financial penalty to the responsible it would be sensible to minimize any unnecessary motion of this type! You will see in many companies now self adjusting tables that keep the product to be processed at just the right height for the operator to eliminate bending as the stack reduces in height as it is used.

The motion within a machine can also be wasteful contributing to the waste of processing time. You often see after a machine is loaded with product the tool will move towards the holding fixture to begin it’s work. The tool obviously has to be clear of the fixture to enable the operator to load it, but often it is far to far away which means that time is wasted as it travels to the jig. This may be only a few seconds but if the process is repeated as often it is, many times over a shift, the loss can add up quite significantly.

In addition to this, the movement speed is often left at the same rate as the “working” speed, so instead of the machine moving rapidly from one position to the next when not actually applying any work it moves at the slower work speed.

Again, stand and watch and study what actually happens, it is surprising what you will observe if you take the time to actually watch what is happening. Watch and question what you see. Why is the material where it is, can it be brought closer? Why do we have to keep turning the product and switching hands, is there a better more efficient method?

So watch and question everything, this is how to implement lean manufacturing, in my next post I will continue to discuss the seven wastes, moving onto the waste of transportation. To go to the full list of waste use this link for waste elimination.

Seven Wastes|Waste of Waiting

In a previous post on how to implement lean manufacturing I discussed the seven wastes, within this post I will discuss the waste of waiting. A fairly obvious waste you would think, waiting for the previous operation, or the machine to finish what it is doing.

Why do people end up waiting? Generally they are waiting because the processes are not balanced, that is they don’t all take the same amount of time. Even in the best flow lines it is very difficult to have all operations perfectly balanced. But in a lot of manufacturing companies this is a major waste.

You see one machine starved of product as the previous process has not finished producing the large batch of components and the batch cannot be moved until all complete. You see people standing idle waiting for the fork truck to transport that large pallet of material. The operator on the machining centre watching the machine patiently while it completes its eight minute cycle.

Just go and stand in the center of your company and watch what is going on, how many times do you see people just waiting, or working slowly so as not to bring attention to the fact that they do not have enough work?

When learning how to implement lean manufacturing, you learn how to make the value flow at the pull of the customer. As I have already mentioned before when discussing Just In Time (JIT), the ideal would be to have a single piece flow, the product moving through each process when required by the customer. The idea at this point is to try to balance each operation so that they take as close as possible the same amount of time. If you go into a car assembly plant and watch the operators on the line, they all have the same amount of time to complete the work before the car has moved into the next section. If the work took too long then it would not be complete before the next section began their work!

Many of the other wastes contribute to the waste of waiting, one process will often be waiting for the previous as rework is completed due to the waste of defects and so on.

As to the operator waiting for his CNC machine to cycle for eight minutes or the injection molding operator watching his ninety second cycle, many companies now will have them operating multiple machines organized in a cell to utilize their time fully. But so many still have the operators stood there waiting “in case something goes wrong!” The operator could be loading the next products into an additional fixture, working on the next operations or running additional machines, but not just waiting – do you really want to pay someone to stand and watch a machine for the bulk of their day?

So if we are going to learn how to implement lean manufacturing we need to learn how to eliminate this waste of waiting. The easiest thing here is to look at our flow and try to balance it. Tools such as Heijunka can be used here to help with balancing the flow, more about the tools in future posts. Look at our scheduling within the factory, we often plan delays into the process! Look at the physical locations of machines and processes and try to bring them closer together. Reduce batch sizes to as small as possible, aim for single piece flow.

So if you are learning how to implement lean manufacturing and you walk into a factory and see people waiting everywhere you look, you can be pretty sure that they have the waste of waiting as one of their seven wastes. To return to the list of wastes use this link for waste elimination.

Seven Wastes|Waste of Waiting

The waste of waiting; processing time

In a previous post on how to implement lean manufacturing I discussed the seven wastes, within this post I will discuss the waste of waiting, specifically processing time. Excessive time spent processing product will cause your product costs to be higher, or alternatively your profit margin to be lower.

Processing time if excessive will cost you time and therefore money. It will give you low productivity therefore high labour costs. Your machine costs will be higher and utilization lower. All of this leading to as I said above higher costs or lower profit.

This also reduces your capacity, you are using your time and resources doing something that ties up your machinery and people and not allowing them to work on new business opportunities. I have been into many businesses that have had to turn away work because they do not have the capacity to fulfill the contracts.

The causes of excessive processing times are many, often they are down to the people aspect, they are not properly trained or do not have the required skills. The methods that they are using are not right or are not clearly documented causing variation.

The machine or jigs that they are using may be worn or incorrectly set. There is poor knowledge of how to operate the machinery and how to set it up. This may cause additional problems such as defects also. I have been into many factories to investigate the cause of defects and delivery delays and found many problems in this area. Like defects people tend to live with the problems without dealing with them.

I have seen many instances where an operator will spend time forcing either defective product into a fixture or correct product into an incorrectly set fixture, this taking excessive time to do but the operator just continues to do it month after month.

When you learn how to implement lean manufacturing you will spend much of your time watching processing on the shop floor. You will see many times wasteful acts due to incorrectly set machines or defective supplied products that have gone on for years. The operators live with the problems, thinking that they are doing you a favour by working around the problem but actually slowing down the process. It often becomes part of the training handed down from one operator to the next!

We often have excessive processing times due to our supplied product either being wrong or wrongly specified. How long do some machining operations spend doing “roughing cuts” to bring material closer to size for machining rather than buying in material at the right size.

Design often plays a vital role in processing time, for example fixing being placed in difficult to access locations for assembly. They can often be moved or eliminated altogether by altering the design so that components “snap” together without the use of separate fixings.

Watch every step of a process and question every aspect of it, why does the machine run at that speed? Why are there so many fixings? Are there always burrs to remove? Does the fixture always have to move so far before the operation begins? You will be surprised what you will see, just take a few hours and just watch one of your processes and use some simple good old fashioned common sense.

As I continue my ramblings about how to implement lean manufacturing I am sure you will find many techniques that are relevant to eliminating wastes such as Kaizen. My next posting will continue with the waste of waiting. To return to the list of wastes for waste elimination use this link.

Seven wastes|Waste of Defects

In my previous post on how to implement lean manufacturing I discussed the seven wastes, within this post I will discuss the most obvious of wastes, that of defects. By most obvious, I mean that when most people think of waste they generally only think of product or services that are defective.

What is a defect? Well a defect is any product or service that has failed to meet the customer requirements, whether you are talking about the customer as being the final end user or the next step in the process.

We have defects in what we do for a number of reasons, and many people and companies turn a blind eye to defects as they are used to it. How many manufacturing companies accept product from their suppliers that the operators then have to tweak to make it fit into the process? How many times a day do you personally tweak or repair something to let yourself progress in your work without going back to the owner of the defect? We live in a world full of defects in one way or another and we are programmed to just accept it. DON’T.

Defects cost more than you think, the cost of a split widget in the manufacturing process is not just the material cost of that widget and the cost of labour to get it there. The cost of defects is often described as an iceberg, just a small part of which is floating above the surface.

When you are learning how to implement lean manufacturing you need to be aware of what is laying beneath the surface of the water. Defects have many hidden costs, these include rescheduling costs to replace defective product, excessive inventory, reduction in capacity, longer lead times, rework, scrap and concessions, paperwork, complaints and potential lost business. The list could go on and on, typically the true cost of a defect is 10 times the initial cost.

What causes defects, well there are many things that could cause them. Typically they are caused by unclear operating procedures and poor specifications. Normally due to a lack of training, shortage of skills or even down to just a plain old fashion operator error.

In the past many companies tried to find defects through the use of quality control. They had inspectors and testing to try to find defects and remove them from the process. Many companies still use these quality control inspectors. But this is not how to implement lean manufacturing, we want to eliminate the waste of defects not just find them. At the end of the day the inspector is just an additional cost within the company, what he is doing is not adding any value to the product and is all waste.

Most companies now have “seen the light” and look at quality assurance, assuring the quality of the product by putting in place processes and specifications to prevent the production of defects rather than trying to find them after the event. However in my experience the beaurocracy that they put in place can be excessive and unnecessary.

When learning how to implement lean manufacturing we need to ensure that our processes do not produce defects through improving the reliability of processes through things like total productive maintenance (TPM) and using techniques such as Poka Yoke (mistake proofing). Look for the waste in your processes and eliminate the waste of defects. More on these techniques and how to implement them in later posts. The following link will enable you to go back to the description of all wastes to enable waste elimination.

Seven Wastes|Muda|Waste Reduction|Waste Elimination

If you are going to understand how to implement lean manufacturing then you need to understand the concept of waste or as the Japanese would call it; muda. One of the most obvious concepts of lean is waste reduction or waste elimination to become more efficient. Any waste is normally categorized as being one of “The Seven Wastes”, although some have increased this to eight or more by including the likes of “wasted talent”. I will talk at greater length about the individual 7 wastes later.

Most people when they begin to learn how to implement lean manufacturing base their learning around the Toyota Production System, as this is where most of our lean manufacturing comes from. How does Toyota define waste; “anything other than the minimum amount of equipment, materials, parts, and working time absolutely essential to production.” Another alternative could be that of Hay; “anything other than the absolute minimum resource of materials, machines and manpower required to add value to the product.”

Seems an OK definition I hear you say, but; what is “absolute minimum required”? The above statements are subjective therefore a weak basis for agreement. One persons bare minimum is too low for some and too high for others. We need to have a better definition if we are going to be successful when we learn how to implement lean manufacturing.

Let us think about “work”, there are two aspects to any work effort that we do, that which adds value and that that does not. What is value? Value could be defined as an explicit customer requirement, if what you are doing is not meeting this explicit customer requirement then it is not adding value to the product or service. Non value adding work costs you time and money and does provide anything that the customer requires.

So what may be a better definition of waste? Something is waste if it “does not meet an explicit customer requirement” and if it cannot be shown to be performed more economically. I think this is a better definition, feel free to argue with me and give a better definition if you like.

So how much waste is out there? I am sure that you spend most of your day working hard, but sit back now and think about the above definition. How much of what you do is meeting an explicit customer requirement? What could be done more efficiently? Studies show that most people spend less than 5% of their time adding value!

Many people would dispute this, but just think about the definition and what you do in the day. Break every action down and think if it is meeting a customer requirement that you are paid for? After all the customer is only paying for the product or service that he wants.

So what are the seven wastes; defects, processing times, inventory, overproduction, waiting time, transportation, and motion. To this list an eight waste is often added, that of untapped human resources or waste of talent. In addition to this in today’s age of environmental awareness we also often add the wastes of energy and by-products.

The following links will take you to each of the relevant wastes;

Waste of Defects
Waste of Waiting Part 1
Waste of Waiting Part 2
Waste of Motion
Waste of Transportation
Waste of over processing
Waste of over production
Waste of Inventory
Waste of talent
Waste of Energy
Waste of By Products

When you learn how to implement lean manufacturing these seven wastes are an important part of that learning. If you want to be able to eliminate waste or go about waste reduction then you need to be able to recognise it for what it is. Each waste deserves detailed descriptions so I will deal with each one as separate postings.