Over the past two decades, Lean has been the rage first in manufacturing and now in services and even government. By now, most CEO’s have been part of some kind of Lean journey. For some, it has yielded great rewards but for others there has been disappointment and still others, disaster. Indeed, in 2011 an article in Forbes reported that only two percent of “kaizen events” (short, focused Lean projects) achieved their anticipated results. Why is this true? In short, because many have approached Lean as “improvement by imitation” and imitating a company that is very different from one’s own, is a dangerous thing to do.
First let’s try to understand why Lean works so well and this will suggest some essential steps that will guarantee Lean success. The challenge of any production system is to match production to demand. If production and demand are perfectly matched, then we produce parts just as customers need them – no inventory, no waiting. Moreover, if we can set our capacity to exactly the rate of demand, then we have 100 percent utilization of expensive resources and labor. No inventory, no waiting, no wasted capacity – a perfect world.
Why is this so hard? In a word, variability. There is variability in our processes (machines go down, workers perform at different rates) and even more variability in demand (to see this, look at the day-by-day demand of an individual item). So if there is variability in both demand and production, there must be some sort of “clutch” to link them.
The book, Factory Physics, shows that there are only three possible clutches which are called “buffers” and they are:
Note that the “Demand-Production” model here can signify the relation between the entire firm and its customers, demand from one plant with production coming from another, or even demand from a production line in a plant and production coming from its supplier. So the idea of demand and production being buffered with inventory, time, and/or capacity can be applied almost anywhere.
The buffers interact in special ways. First, the inventory and time buffers are two sides of the same “delivery” coin. Companies can deliver quickly by always having an item in stock or by offering short lead times (time quoted to the customer). But to keep stocks and lead times small, the throughput time (the time through the line) must also be small which means that queueing must be minimized. Keeping production queues short when there is variability requires capacity above and beyond the demand (a capacity buffer). The good news is that the first increment of any buffer provides the largest buffering effect. A small amount of time can reduce the required inventory buffer to give the same on-time delivery. A slight amount of extra capacity can reduce both the inventory and time buffers. And finally, a small quantity of work in process (WIP) can reduce the required capacity buffer.
This last fact is important because some companies have gone from being Lean to being anorexic. Pushing WIP down to the level of “one-piece-flow” will reduce the throughput time and inventory but can also result in significantly lower output of the line if there is high variability. We have seen such lines running at only 70 percent utilization requiring a two day weekend shift for a line that has the capability to do the work within a five day week. Allowing a small amount of WIP in the line greatly reduced the capacity buffer without significantly increasing either the time or inventory buffers.
With these facts in mind, set a course for Lean manufacturing that will surely succeed (Figure 1).
The actual implementation will be different for different situations. But it need not be like Toyota. Moving assembly lines are not required and neither is a fixed make-up period. WIP control can take many forms and does not have to be a “Kanban” system. The good news is that any production facility can be Lean by understanding the true meaning of Lean – “the production of goods or services with minimal buffering cost.”
Mark L. Spearman has worked more than 30 years in manufacturing and is the CEO of Factory Physics, Inc. (factoryphysics.com), a consulting firm that applies Factory Physics analytics and methods to help companies become more profitable. firstname.lastname@example.org
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