Uk - Road To World Class Manufacturing(1)

THE ROAD TO WORLD CLASS MANUFACTURING 2002

sponsored by

LEAN MANUFACTURING SURVEY REPORT

in association with

part of the Industry White Paper programme from The Manufacturer

CONTENTS Reports Strategy - The era of the virtual customer The search is on for new sources of competitive advantage

6

Lean manufacturing survey report Report and analysis of the state of lean manufacturing in the UK

Strategy The future belongs to those that start from a position of lean

Page 6

10

Lean manufacturing - The lean route The development and future of lean manufacturing

22

Global leaning - The lean league Richard Schonberger reports on lean trends around the world

26

Value stream mapping The first step in the journey to lean is obtaining a map

30

Benchmarking - Seeing the light 32

Benchmarking your route to excellence

Maintenance - Lean maintenance

Global learning

36

Keeping the operations running

A who’s who of the fatties and skinnies in the manufacturing world

Page 26

Supply chain - The vital link Supply chain challenges in collaborative manufacturing

40

HR - People at the centre The role of human resources in world-class manufacturing

44

Sponsors’ contributions Benchmarking Comparisons show what is possible and stimulate us to do better

Page 32

MCP - Gaining through good maintenance

48

Oliver Wight - The journey to excellence

50

Papilio - Aiming high

52

Productivity Europe - Overcoming learning barriers

54

The road to world class manufacturing 2002

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REPORT SPONSOR

A LEADING EDGE VIEW Manufacturing has always been a competitive and diverse industry - perhaps never more so than right now. Today, the rate of change is increasing at a rapid pace and uncertainty is a constant. An organisation’s success is dependent upon its ability to stay ahead of trends and to respond dynamically to market opportunities and fluctuations. Manufacturers need to increase productivity, optimise their profits and cash flow, lead industry trends, and drive competitive advantage to be successful. Our Manufacturing Industry Group is helping our manufacturing clients respond to these challenges by going beyond the theoretical, improving performance at all levels, and enhancing shareholder value. We have a network of practitioners in the manufacturing sector around the world who can be called upon to assist your business no matter where it is operating. The Deloitte & Touche Manufacturing Group in the UK is part of this global network of industry specialists within Deloitte Touche Tohmatsu. The expertise and experience of our group members combines to form a Centre of Excellence here in the UK acting in an advisory capacity to all manufacturing clients. Our experience in the manufacturing sector runs deep. Our focused group of practitioners are dedicated to helping clients evaluate complex issues, develop fresh approaches to problems, and implement practical solutions. Working with manufacturers from planning and design to implementation and beyond, we help clients leverage their unique competitive strengths. Our practitioners facilitate the development and execution of manufacturing strategies that show tangible results, whether it be a reduction of cycle times, inventory and indirect costs, improvements in operational processes, supply chain, technology and organisational structures, or e-security around their information and reporting systems. Our services maintain a leading edge view of the manufacturing industry. We help companies cope successfully with dramatic change, identify the new and existing indicators of manufacturing excellence around the world, and understand how they can position themselves for the future. Success in manufacturing is dependent on making the right connections to improve business performance and value for all stakeholders - shareholders, customers, suppliers, business partners and

employees. Deloitte & Touche

understands the critical issues facing the industry and can be the catalyst to making the right connections for our manufacturing clients. Deloitte & Touche is the UK’s fastest growing major professional services firm in 23 locations, with over 10,000 staff nationwide. It is the UK practice of Deloitte Touche Tohmatsu, a global leader in professional services with over 100,000 people in 140 countries.

www.deloitte.co.uk

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REPORT SPONSOR

JOURNEY TO EXCELLENCE Oliver Wight is a worldwide consultancy with offices throughout Europe, in North and South America and the Asia-Pacific region. At the leading edge of management thinking and practice, our unique ‘integrated business management’ model (IBM) lies at the heart of client journies to business excellence. The IBM model addresses all aspects of company planning and execution from the boardroom to working levels in manufacturing and service sectors. It provides one common agenda for your company with one set of figures and one set of priorities. It links diverse processes in managing the extended supply chain, product and customer portfolios, customer demand, and strategic planning into one seamless management process. The renowned ‘Proven Path’ process for change management lies at the heart of our approach to ‘integrated change management’. This integrates your strategic journey to excellence through major project management to everyday improvement programmes ensuring they are visible and contribute to company goals. This process promotes rapid change through line ownership for successful ongoing management, accelerating management processes and controlling waste and variability. Your implementation is supported by our practical experience and knowledge through facilitation, coaching and education, backed by our unique ABCD checklist, the longest established business excellence assessment tool.

www.oliverwight.com

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THE ERA OF THE VIRTUAL CUSTOMER As manufacturers move out of the post-industrial era, the search is on for new sources of competitive advantage. Julian Thomas explains nly a decade ago, manufacturing executives were preoccupied with eliminating

O

direct labour through automation, integrating manufacturing systems with other

business functions and pursuing competitive advantage through economies of scale. Quality was eclipsed by time-based competition. The global landscape was also radically different. The Toyota Production System dominated world-class manufacturing and Japanese manufacturers were the envy of the world. Times have changed. Globalisation and rapid technological change are rewriting the rules of competition. Manufacturing is poised for a renaissance - but only for those companies that have already embraced and instilled lean manufacturing into the fabric of their organisations. The future UK manufacturing sector will be populated by those organisations that follow the road to world-class manufacturing starting from a position of being a lean organisation. In contrast to the recent past, technology is now affordable and abundant, while skilled technical workers are in short supply. The ubiquitous availability of information and internet technology is enabling niche players, as well as those in emerging markets, to leap traditionally cost-prohibitive infrastructure barriers and assert themselves. Advances in information technology and telecommunications are accelerating productivity and supply chain integration - distribution bottlenecks are as feared today as bottlenecks in production were just 10 years ago. The rising sophistication and expectations of customers have given an unfamiliar primacy to co-ordinating marketing and sales with manufacturing. The centre of gravity of the global economy is irrefutably shifting to emerging markets. Since the start of the 20th century, manufacturing has passed through two key phases.

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The road to world class manufacturing 2002

STRATEGY

The first phase - the mass assembly era - was based on the production logic of

Customers are also

economies of scale. This gave way to the quality era in the 1980s, which funda-

beginning to exert their

mentally reoriented business toward continuous process improvements and the elimination of waste.

bargaining leverage to

The quality era is now evolving into what we call the era of the virtual customer.

influence price and are

Customers are deciding what, when, where and how they will purchase goods and

demanding products and

services. Customers have virtual access through cyberspace to more products and services than ever before and they are using smart systems to help them make more

services in ‘zero time’.

informed, personalised choices. Customers are also beginning to exert their bargaining

To satisfy customers,

leverage to influence price and are demanding products and services in ‘zero time’. To

manufacturers will require

satisfy customers, manufacturers will require a fundamental shift in executive mindsets and organisational cultures. Manufacturers must eliminate traditional boundaries

a fundamental shift in

between customers and integrate more closely with them. This means partnering with

executive mind-sets and

customers and emphasising the co-ordination of research and development (R&D),

organisational cultures

marketing and manufacturing. Successful manufacturers will integrate the customer into the fabric of their organisation. Leading manufacturers anticipate change and possess the flexibility to quickly adjust their strategies. As they expand into new markets and confront new competitors, the leaders recognise that they must be able to react to changes in a highly uncertain environment. Even more so, top performers are proactively changing the rules of competition to their advantage, and to their rivals’ disadvantage. New wealth from manufacturing is being created more by adaptability, value-added services and speed of execution than by sheer quantity of capital or technology. This new state of manufacturing means that

The road to world class manufacturing 2002

7

incumbency does not guarantee long-term success. Fierce competition and increasing demand for customised products and services, coupled with shortened product life cycles in most manufacturing industries, suggest that many of today’s leaders will not necessarily be tomorrow’s. Traditional recipes for success are not adequate to compete in the new millennium. How are market leaders meeting the challenges of the 21st century? They are now racing to build flexibility and rapid-response capabilities into their organisations, re-designing their business processes, re-aligning their organisations and leveraging technology to develop innovative, integrated solutions. Top performers are changing corporate cultures that impede fast response and harnessing their knowledge assets to do it. According to a recent Deloitte & Touche global survey involving over 3000 executives, the world’s manufacturing leaders are taking aggressive steps in five strategic areas to: Confront the realities of globalisation: The study reveals that early entry into emerging markets is preferable to a wait and see approach. Craft a new agenda for product innovation: On average, executives expect the share of revenues attributed to new products and product enhancements to increase by 50 per cent over the next three years. Many are trying to pull ideas from their customers rather than merely push products into the market and reinventing their new product development (NPD) strategies to utilise new technologies and increase co-ordination between R&D, manufacturing and marketing. Resolve the customer paradox: There exists a paradox in manufacturing: the emphasis on quality is going up and customer satisfaction is going down. Manufacturers that are focused on customers are most likely to resolve the paradox. Differentiation in the era of the virtual customer will require superior marketing and customer service. Most manufacturers do not yet possess these capabilities. The study reveals that most continue to focus on product quality and neglect integrating manufacturing with marketing and sales. Integrating the global supply chain: The speed at which a company anticipates and adapts to market forces is a critical source of competitive advantage for manufacturers. A company’s ability to seamlessly integrate all of its supply chain elements - from departments and business units to suppliers and customers - will determine success in the 21st century. Market leaders have already squeezed excess costs out of their supply chains by replacing legacy systems with enterprise-wide resource planning (ERP) system. Growth-minded executives are now shifting their focus to tightening the links with suppliers and customers. They are also leveraging internet technologies and adding

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The road to world class manufacturing 2002

STRATEGY

functionality to ERP applications to capture and integrate key customer information into strategic planning. Forging alliances with domestic and overseas partners, as well as outsourcing, are also strategies to improve supply chain integration. More and more, manufacturers are outsourcing logistics and support services, such as information services management and software development, in order to focus on their core competencies. Align the organisation to compete in the 21st century: The imperatives for the 21st century - globalisation, product innovation and supply chain integration - all require a fundamental shift in executive mind-sets. Operating successfully on a global scale

The study provides strong evidence that investment

requires companies to re-evaluate their traditional strategies, from sourcing and

in knowledge assets

production to distribution and marketing and customer service. It requires continuous

underlies the superior

change - change that encompasses the entire organisation, from business process capabilities to people. More than two-thirds of all manufacturers in our study have undertaken major organisational initiatives in the recent past. Past efforts to

performance of the market leaders

restructure, streamline and downsize are now giving way to a focus on changing corporate culture that impedes fast response. In short, the name of the game is speed and flexibility. Leading executives are preparing their organisation to rapidly respond to increasingly unpredictable changes in customer demands and market dynamics. Although the processes targeted for re-engineering vary by region - North America (information systems), Europe (business planning and logistics management), Asia-Pacific (finance and accounting and customer service) and Latin America (logistics) - the focus is clearly on improving flexibility and customer responsiveness. The study provides strong evidence that investment in knowledge assets underlies the superior performance of the market leaders. Market leaders have re-engineered their human resource functions and are now investing in workforce management programmes that promote highperformance work teams, improve cross-functional training and facilitate worker empowerment - ultimately creating a culture that thrives on learning and change. Market leaders are seeking competitive advantage on multiple levels. They are establishing early-mover advantage and putting their stake in the ground in target markets around the world. They are shoring up their arsenal of capabilities and investing in technology, best practices and people. The leaders are recasting their enterprises to improve new product development, create a customer-centric orientation, tighten supply chain links and harness the knowledge assets of their organisations. Julian Thomas is Partner at Deloitte & Touche

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LEAN MANUFACTURING SURVEY INTRODUCTION Conquest Business Media’s Industry White Paper programme, produced under the auspices of its flagship magazine The Manufacturer, is a series of high level publications targeted at decision-makers throughout UK industry. They are a compilation of original research findings and editorial analysis of key developments in manufacturing processes, information technology and communications. Each publication aims to inform and assist senior management; helping them to make the most appropriate decisions for their companies and so maximise the benefits of emerging technology, services and applications. As an extension to the White Paper Programme, Conquest has already launched the Annual Manufacturing Report (AMR). This initiative is designed to measure and monitor changes in key issues and factors affecting UK manufacturing industry across a very broad range of subject matter, including the economy and general economic conditions, the role of the Government and its various support agencies, and overseas influence and threats. The AMR identifies key areas of capital expenditure, and measures change in major capital investment categories. It measures the extent of focus on change and improvement in key business processes and techniques, and identifies the extent to which initiatives such as customer relationship management (CRM), supply chain management (SCM), and change management is being embraced and planned for the future, and the degree of focus on new product development (NPD). Now, in late summer 2002, The Manufacturer commissioned Coleman Parkes Research to carry out its first Lean Manufacturing Survey. This delivers a unique insight into the extent to which lean manufacturing has been embraced in the UK, how its principles and tools are perceived, and exposes the key issues that inhibit its uptake. Its findings are accompanied by expert analysis, opinion and discussion about the UK’s progress on the road to world class manufacturing.

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The road to world class manufacturing 2002

LEAN 2002 RESULTS

EXECUTIVE SUMMARY • The survey shows that the awareness level of lean is very high. Although 26 per cent are partially in the dark, these are mostly small companies, and awareness is universal in larger organisations. However, this result is an overestimate of the general situation, as companies that were completely unaware of lean were dropped from the study. • Those aware of lean have an adequate view of what its focus should be, but too many focus on cost reduction rather than the other issues involved. • Manufacturing companies are focusing on a wide range of key issues some of which are not easy to achieve. Customer focus is a universal aim, and just-in-time, reducing time to market and supply chain management are perceived to be much harder to attain for many companies. • There is evidence of a change starting. Many companies are focusing on process re-engineering, material flow management and time to market. But when questioned open-ended, they summarise this as cost reduction. • The level of collaboration with suppliers and customers is remarkably high, and this reflects the drive to focus on customer activity and reduce costs down the supply chain. But knowledge and information flow down the supply chain is not as extensive as these findings would lead us to be believe. Too few companies know how far their suppliers and customers have advanced with lean manufacturing, which indicates that collaboration is not truly transparent. • When looking at the advantages of lean, far more respondents focus on the cost reduction benefits than on improvements in the process and material. This reflects a clear financial focus, and perhaps that cost reduction is easier to report than improvement in other activities. • Company culture is a big issue when considering implementing lean manufacturing, and people related problems such as attitude of the staff and opposition to anything new, all feature as barriers to be overcome. • Many companies feel that lean is achievable in the short term - a strong statement for manufacturing industry.

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METHODOLOGY The lean manufacturing survey is based on 100 interviews with production directors and managers in UK-based manufacturing companies, undertaken in September 2002. All interviewees were screened to ensure that they were in a position to comment on the core issues in the questionnaire. Where it became clear that the respondent did not know enough about lean techniques, the interview was terminated. These interviews do not form part of the project. On average each interview lasted 12 minutes, and a response rate of 83 per cent was achieved. The breakdown of the completed interviews by company size (as determined by number of employees) is:

11% 500+

26% 1 - 99

30% 250 - 499

33% 100 - 249

A cross section of industries has been included in the survey covering:

8%

Pharmaceutical Electronics

14%

White goods

4%

Engineering

34% 5%

Packaging

6%

Food and drink Printing equipment

4% 5%

Chemicals Automotive

6%

Telecommunications

6% 8%

Other 0%

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The road to world class manufacturing 2002

5%

10%

15%

20%

25%

30%

35%

40%

LEAN 2002 RESULTS

LEAN MANUFACTURING SURVEY - DETAILED FINDINGS Based on interviews with 100 production directors and managers

Awareness “Have you heard of the term lean manufacturing?”

No 26%

Yes possibly 8% Yes definitely 66%

The majority of respondents had heard of lean manufacturing. Those who answered ‘no’ here, were later found to be aware of the processes and concepts of lean manufacturing, and therefore continued with the interview. Smaller companies are slightly less likely to have heard of the term than their larger counterparts. Companies in the pharmaceutical and white goods sectors are more likely not to have heard of the term.

“What do you understand by the term lean manufacturing?” The 74 per cent aware of lean manufacturing responded:

Removal of waste

45%

Reduced costs

24% 19%

Improved efficiency and processes Other (all lower than 10 per cent)

29% 0%

10%

20%

30%

40%

50%

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13

Only five respondents, all in the ‘possibly heard of the term’ category, could not provide a description of what lean meant to them, but they were still insistent that they had heard of the term. The level of understanding is good, companies associating lean manufacturing with the removal of waste and reduction in cost of manufacture. Larger companies were able to provide a better definition of lean than smaller companies.

Respondents were asked to rate the importance of key lean manufacturing principles and how difficult they would be to achieve within their own companies Mean score is out of five Criterion

Total quality management JIT Efficient information flows Low stock levels Optimum staff levels A focus on cost control A focus on the customer A focus on new product introduction A policy of continuous improvement Achieving real improvements in supply chain management Optimising IT investment Efficient materials flows Reduced time to market Reduced product cost

Importance Rating (Mean)

Ability to Achieve (%) Achieved

Easy

Quite Difficult Very Difficult

4.34 3.58 4.09 4.07 4.21 4.46 4.74 3.97 4.46

28 12 28 28 28 38 45 27 32

29 31 36 22 28 25 23 30 31

30 25 20 25 25 19 14 20 17

10 25 12 20 15 13 12 18 16

4.21 3.67 4.46 4.10 4.35

17 21 21 18 30

33 30 40 31 31

27 31 18 32 21

18 15 16 15 15

Note: figures will not total 100% as some respondents declined to comment on some criteria.

The most important attributes to the success of the company include total quality management, efficient materials flows, reduced product cost and a policy of continuous improvement. From these results it would appear that manufacturers are focusing on the core issues in the sector at present, producing high quality product at lowest cost, with a focus on continuous improvement. Although total quality management is highly rated as a core attribute, 40 per cent of respondents feel that it will be at least quite difficult to achieve. 50 per cent feel that JIT will be at least quiet difficult to achieve with 25 per cent reporting it will be very difficult. Almost one third of companies feel they have already achieved efficient information flows and a further third feel that it will be easy to get there in the

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The road to world class manufacturing 2002

LEAN 2002 RESULTS

short term, while nearly half of all companies feel that low stock levels will be harder to achieve. 38 per cent of companies are already focusing on cost control and a further 25 per cent feel it will be easy to achieve. Customer focus is an issue that manufacturing feels it has managed well in the past, with 45 per cent claiming to be customer focused and a further 21 per cent saying it will be easy to achieve. However, one third still feel that it will be hard to manage and these are typically smaller and medium sized businesses. A policy of continuous improvement was rated as a key issue for manufacturing in general and only one third of companies feel that they have achieved the appropriate level of control in this area. 33 per cent of organisations still feel it will be at least quite difficult to achieve. 45 per cent of companies feel it will be quite or very difficult to achieve real improvements in supply chain activity, a surprising figure given the focus on supply chain activity over the past couple of years. Two in five companies feel that it will be easy for them to achieve efficient material flows and approaching half of those sampled feel that reduced time to market will be at least quite difficult to achieve. This may mean that they have already taken time out of the product development process and that saving even more time will be very hard indeed. However, only 18 per cent of companies feel they have actually reduced product time to market as far as they can. Interestingly, 31 per cent of companies feel that it will be easy to reduce product cost, but they have not yet done it! 15 per cent stated it would be very hard, perhaps because they have cut costs to the bone already.

PLANS FOR LEAN MANUFACTURING “Within your company at the present time, are you focusing attention on changes or improvements in any of the following areas” “And are you planning to look at any of these areas within the next 12 months?”

62%

Pharmaceutical 23%

68%

Material flow management

23%

Lean purchasing and supply chain management

23%

60%

67%

Time to market 19% None

62% 0%

10%

Yes, Current

20%

30%

40%

50%

60%

70%

Yes, Planned

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15

Note that the current and planned activities are not mutually exclusive. A company could be focusing attention on an issue now and also in the future as it feels that it has further to go or other areas in which to improve. Again, material flow management is a key issue with 68 per cent of companies focusing on this compared to 62 per cent focusing on process re-engineering. Encouragingly 60 per cent of companies are focusing on lean purchasing and supply chain management. Time to market is still a focus for two thirds of those sampled. As for future activity, the focus will again be on material flow management and process re-engineering, as companies presumably continue to find improvements and reduce cost in their businesses. There will be a marginal shift away from focusing on time to market.

SUPPLIERS AND CUSTOMERS “Do you already have well developed strategic collaboration with customers and/or suppliers, are you planning to develop strategic relationships within the next 12 months or are such relationships of little or no importance to your company?” Little/no importance 2% 11% Planned within next 12 months

Don't know 6%

CUSTOMERS

79% Already developed

Little/no importance 2%

Don't know 8%

SUPPLIERS

17% Planned within next 12 months

69% Already developed

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LEAN 2002 RESULTS

Nearly 80 per cent of those questioned claim to have well developed strategic collaboration in place with customers, while almost all of the rest will have them in place within 12 months. This emphasises the current focus on customer retention and development throughout manufacturing in the UK. As expected, strategic collaboration is seen as very important by the majority of those questioned, with only a very small minority saying they are of no importance. Strategic collaboration with suppliers is also significant with two thirds of companies claiming to have well developed collaborative relationships, and a further 17 per cent see them as a short term focus. Again, all companies except a very few, feel that the relationships are of great importance.

“To your knowledge, to what extent are your customers actively pursuing lean manufacturing principles?” 12% Not appropriate

21% Most are well down the road

25% Unknown

21% A few are well down the road 7% 8%

Most, if not all, have done nothing

A few have started to look into it

6%

Most have started to look into it

The questions on customer-based lean manufacturing have elicited split opinions. Worryingly, 25 per cent do not know if any of their customers are focusing on lean activity (yet they claim close collaboration) and 12 per cent feel it is not appropriate for them. Nearly one quarter feel their customers are well on the road to following lean manufacturing principles, while a further 21 per cent say most are down the road. But the level of awareness is poor overall, given that these companies have been following customer focused activities and claim very close collaboration with their customers. Among those known to be down the lean manufacturing road, there is common consensus that the main areas of focus are cost reduction and supply chain management, the latter being focused on reducing cost in the supply chain and improving collaboration. A minority are focusing on time to market.

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Perceived value of lean manufacturing “Thinking about all the various aspects of lean manufacturing we have discussed, how beneficial do you think applying lean manufacturing principles in your company would be”

17% Not sure

Not at all beneficial 1% Not very beneficial 5%

20% Quite beneficial

57% Very beneficial

There is common acceptance that lean manufacturing can be highly beneficial. 77 per cent said that such an approach would be at least quite beneficial, and among those who knew enough to have an opinion, the view is almost universal.

“What advantages would you expect to achieve from applying lean manufacturing principles?” Based on the 77 companies seeing lean as beneficial (spontaneous responses)

Reduction in costs

52%

Better delivery times

16%

Increased efficiency

13%

Increased customer satisfaction

12%

Increased profitability

10%

Increased product quality

9%

Reduced stock

9%

Reduced waste

8%

Competitive edge

8%

Others

16% 0%

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The road to world class manufacturing 2002

10%

20%

30%

40%

50%

60%

LEAN 2002 RESULTS

As can be seen, the most common benefit of a lean approach is cost reduction. Other key benefits, but ranked much lower than cost reduction, include better delivery times, increased efficiency, better product quality and improved customer satisfaction. Generally, companies seek a number of key advantages from a lean approach.

At the moment, how close is your company to being a lean manufacturing company? We've achieved Lean Manufacturing Never likely to be 2% 12% Do not know

Not at all close 4%

3% 22% Very close

25% Not very close

32% Quite close

As can be seen, only three per cent of companies feel they can be called truly lean-based manufacturing businesses while 22 per cent feel that they are very close to achieving the standard. Nearly one third have made good progress to date but have some way to go, while over one third (including those who did not know as they are likely to fall into this category) have a long way to go to meet the standard.

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What barriers might prevent or delay the application of lean manufacturing principles within your company? Based on 97 companies that have not achieved lean manufacturing

Company culture

48%

Investment/cost

41%

Attitude of the staff

38%

Opposition to anything new

33%

Lack of understanding of the approach

29%

Lack of understanding of the benefits

29%

Nature of manufacturing facility

27%

Inertia

23%

Being able to quantify the benefits

22%

Multi national sites

22%

Multiple location

21%

Attitude of the board

19%

Others

2%

None

7% 0%

10%

20%

30%

40%

50%

The main barriers that were seen as preventing the adoption of lean principles were the investment needed to go down the lean route and more importantly the culture of the company. Couple this with the attitude of the staff, which we can take to be negative towards the approach, and it is clear that people - based issues cannot be ignored when looking to apply lean manufacturing principles. Almost one third of respondents claim that they do not really understand the approach or its potential benefits.

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The road to world class manufacturing 2002

LEAN 2002 RESULTS

“Which of the following phrases best describes how you feel about lean manufacturing?”

Don't know enough about it to comment It's just jargon no real substance to it 1%

16%

Great in principle but very difficult to achieve in practice

14%

24% A realistic goal to aim for but not in the short term 45% A realistic goal and we aim to get there within 12 months to 2 years

It is interesting to note that only 14 per cent of companies feel that lean manufacturing is great in principle but hard to achieve in practice, indicating a strong desire to create change in manufacturing. 24 per cent felt that lean is a short term goal while getting on for half feel that the goal is realistic but will take up to two years to achieve. Generally, there is common acceptance that lean is a key issue that must be embraced in the short term to remain efficient and competitive in a global marketplace. However, there are many barriers to overcome before lean can be successful in all companies, the most concerning is the cultural barrier.

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Dell has been pioneering mass customisation

THE LEAN ROUTE John Bicheno, director of the MSc programme in lean operations at Cardiff Business School, looks at the development and future of lean, and the merging of other theories to create a powerful manufacturing whole t is now 20 years since Richard Schonberger and Robert Hall wrote the two books

I

which effectively launched lean in the west. It is over 10 years since Womak, Jones

and Roos wrote their seminal book naming the approach ‘lean’. Huge changes have taken place, yet for the majority of organisations the lean potential has hardly been scratched much less mined. A recent Engineering Employers Federation (EEF) report gave a good indication of the status of lean in the UK. Interesting findings included: • Around 30 per cent of organisations surveyed were undertaking lean in the whole organisation, 10 per cent were just using lean in manufacturing, but around 40 per cent had no plans for lean • EU owned and in particular US owned companies have greater uptake of lean than UK owned companies • Large firms (500 employees plus) have a far greater uptake of lean • The most popular of the lean tools and concepts is to do with suppliers and the supply chain • Companies that have started lean initiatives have almost invariably shown large gains Although the EEF report gives an excellent overview, there is a danger that lean is thought of as a box of tools to be implemented cherry-pick wise (this from the author

22

The road to world class manufacturing 2002

LEAN MANUFACTURING

of ‘The Lean Toolbox’!). No doubt some tools used individually have given good results. The problem is that it is an end-to-end value stream that delivers competitiveness. A great cell feeding into a morass of poorly controlled inventory is waste. A changeover reduction programme in a high capacity area is waste. A 5S programme without follow through into standard attainment is largely waste. Kanban working in a situation of unlevelled demand can be waste. And so on. Even if all these were sorted out though good value stream mapping and a well-directed kaizen programme, lean may still fail to deliver its true potential. One frequently hears that lean is about waste - it is, but it should be more about waste prevention than waste elimination. This is just like the total quality concept of trading the costs of prevention against the costs of inspection and internal and external failure. Spend more on prevention, but far less on failure and inspection. Russell Ackoff talks about resolving problems (by discussion), but better is solving problems (by fact-based scientific study), but best of all is dissolving problems (by tackling root causes). Nonlean practitioners resolve ‘inefficiencies’, beginning lean practitioners solve problems to remove waste, but the experienced lean practitioner dissolves waste. Lean beginners go after waste. This is appropriate given the high levels of waste in

Lean often begins with the

most value streams. Although there will always be another layer of waste to

mechanical, but since

address, the more experienced need to return to value - to the first and second lean principles of customer and value stream. Like the quality concept of quality of

piecemeal benefits are

design and quality of conformance, waste elimination or prevention is but one half of

small, executives may

the total picture. Rethinking the value side is at least as important. This leads to

decide to abandon the

seeking out new opportunities..... Mechanical lean is the implementation of lean tools in a piecemeal fashion. Managerial

lean initiative, having

lean is the implementation of lean tools in an integrated manner. Innovative lean

burned their fingers - in

means taking lean beyond the shopfloor, beyond the organisation to create new

time, if not money. Worse,

opportunity, new value, and new customers. Lean often begins with the mechanical, but since piecemeal benefits are small, executives may decide to abandon the lean

they may even claim to

initiative, having burned their fingers - in time, if not money. Worse, they may even

have “done lean - and it

claim to have “done lean - and it didn’t do us much good”. In the mid 1990s more

didn’t do us much good”

powerful tools were rediscovered - value stream mapping, policy deployment, and the new type of improvement events - and there was increased recognition that lean must be built on a sound foundation of 5S and standard operations. These enabled a more systematic, more balanced, and more efficient approach. But innovative lean is altogether another matter. Here the question is what business and product opportunities does lean create - like Vision Express and the one-hour pair of spectacles, like home breadmakers, like South West Airlines breaking the rules of established carriers. In these examples the customer is primary. Waste reduction and value enhancement is for the customer, not the producer. There may be no greater waste than cutting waste for the producer while increasing it for the customer. Stand back and look at the customer as the ‘object’ of one-piece flow. Line up the stages in process order so that the customer can benefit - then use lean concepts of waste,

The road to world class manufacturing 2002

23

LEAN MANUFACTURING

cells, changeover, pull, small machines, OEE and so on to contribute to customer value.

Lean principles are

To understand lean, it is important to understand a whole series of different concepts.

universal. It is merely a

Water, for example, is a liquid at normal temperatures. Its constituents, oxygen and hydrogen, are gases. You can never understand the properties of water by studying

question of the extent to

oxygen and hydrogen. Likewise with lean and lean tools. Lean is a system - more than

which other concepts can

the sum of its components. Systems are in constant interplay with their environment -

add to the central

where the boundary is not obvious. Systems adapt continuously but at a faster rate when threatened, like ant colonies. Systems evolve - like bugs combating insecticides.

developing core of lean

The Toyota Production System (TPS) grew through revolution and evolution. Revolution rejected the concepts of mass production and economies of scale, and steered the organisation. Evolution developed the details and the tools. When TPS began there were few lean tools - most developed from first principles over several decades, but fitting in with the top-level concept. Lean ideas developed from first principles; Taiichi Ohno believed in developing managers by asking tough questions rather than providing answers. This is in line with the practice of Hoshin or policy deployment, whereby top management sets the strategic direction but evolves the detail, level by level, by a process of consultation. In the reverse direction decisions are taken locally, only migrating upwards in exceptional circumstances. Today large ERP systems, with data warehouses are ‘in’. In lean we have learned about the waste of centralised inventory warehouses as opposed to strategically located supermarkets. The world has learned about the failure of over-centralised economies. But during the late 1990s many manufacturers moved in the opposite direction by implementing large centralised systems - at great cost and often with mixed results. Today’s need is for fast reacting distributed decision-making. There is a case for centralised strategic decisions, but for operational decisions, the lean way is to deal with schedules, maintenance, quality, cell design and even some aspects of design and supply at a localised level. This is not only more effective, but also more human. Build to order was once the only way in which products were made. Then came mass production that gave wide access to products but not to individual preferences. Mass customisation held out the promise of both, but lean concepts are at last making mass customisation a reality. Dell has been a pioneer, and the three-day car study has worked through the barriers that are in the way. But no doubt lean thinking and appropriate flow-based IT systems are about to make quick-response build to order (BTO) a reality in whole new industries. Finally, lean is core to all of this. Hopefully the days of arguing between “lean and agile”, “lean and APS”, “lean and six sigma”, “lean and theory of constraints”, “lean and manufacturing strategy”, and the practice of including a chapter on lean in operations management textbooks, is passing. Lean principles are universal. It is merely a question of the extent to which other concepts can add to the central developing core of lean. John Bicheno is director of the MSc programme in lean operations at Cardiff Business School, and author of The Lean Toolbox, Cause and Effect Lean, and The Quality 75

The road to world class manufacturing 2002

25

THE LEAN LEAGUE Richard Schonberger (below) reports on lean trends around the world and reveals the promotion and regulation candidates in the global lean league table

t’s a puzzle. Examining lean management trends among 604 of the world’s best

I

known publicly held companies, shows the UK on top by a large margin. And what

of Japan, lean’s birthplace? Dead last. Lean is many things, of course, but the amount of stocks carried is a good, visible measure of it. Hold lots of it and you’re fat, little and you’re lean. The leanness studies which I have been collating since 1994, are based on companies’ financial statements. (The actual calculation is turnover, or cost of sales if available, from the income statement divided by value of inventory from the balance sheet; it’s what the accountants call inventory turnover.) They examine many-year trends, not last year’s

26

The road to world class manufacturing 2002

GLOBAL LEANING

or last quarter’s results. The database

Of 38 British companies

goes back to 1950 - subject to availability

studied, 22 have been on a

of the company’s financial records and whether it has been around that long

Jack Spratt diet for at

and remained in the public sector. Of

least 10 years, six more

38 British companies studied, 22 have

were doing fine but have

been on a Jack Spratt diet for at least 10 years, six more were doing fine but

faded in the last half

have faded in the last half dozen years,

dozen years, and five have

and five have neither fattened up or

neither fattened up or

thinned down. That leaves five on the heavy side.

thinned down. That leaves

Among the UK’s 22 fittest are BOC,

five on the heavy side.

GKN, ICI, Johnson Matthey, Smiths, and Pilkington. Boots, Courtaulds, GlaxoSmithKline, House of Fraser, Marks and Spencer, Northern Foods, The Quest factory in Ashford, Kent is part of the ICI Group, one of the UK’s leanest manufacturers

and Wolseley are the companies that had fine slimming-down trends going, only to fade in recent years. Those with no trend one way or the other are Cookson, FKI, Marley and Rolls Royce.

Finally, the five that are leaning the wrong way are Associated British Foods, Bowater, Sainsbury’s, Smith & Nephew, and Tesco. Lean’s origin is in the Japanese auto industry, and how has that country done lately? Honda is fine: The company bottomed-out at 1.1 inventory turns in 1976 and has steadily improved to 7.6 in 2001. The trend reverses itself for Isuzu, Mazda, Subaru (Fuji Heavy Industries), and Toyota. The declines, spanning at least 10 years since a high point, are: Isuzu 55 per cent; Mazda 31 per cent; Subaru 29 per cent. And for Toyota, the globe’s most admired manufacturer? The decline is 74 per cent, having fallen from 45.7 turns in 1971 to 12.1 in 2001. Toyota’s factories are still paragons of lean, but the numbers don’t lie: the company isn’t lean. Is it because of globalisation, inventory pathways stretched to the UK, Australia, the Americas, Thailand, and so on? Perhaps. But Volkswagen, with similar expansiveness, has nearly doubled its inventory turnover, from 4.8 in 1980 to its current 8.9, in the period when Toyota’s plunged. The gains are even more impressive at globally positioned General Motors, up from 4.2 turns in 1974 to a current 13.1, and Ford Motor Company at 4.9 in 1974 rising to 20.8.

The road to world class manufacturing 2002

27

Outside of Japan, plain

Does anybody care all that much about inventories, besides those with lean

old complacency may

aspirations? The City of London and Wall Street care. Because where inventories go,

explain much of the wrong-

so goes cash flow, and analysts scrutinise this even more carefully than earnings. When inventory turns are heading the wrong way, it’s like throwing cash into a bonfire.

way trend. Companies

A caveat: For a given company, a trend opposite to lean may be explained by special

and industries are like

factors. A strategic move into developing countries, for example, usually requires

people; most of us lack the killer instinct

increased stock levels but stark differences in aggregate results for groups of companies are not easily shrugged off. When the leanness data are grouped by country, the UK and Japan make up the extremes. No other nation or region stands out. The US, accounting for about 70 per cent of the 604 companies, has a middling mix of improvers and laggards. Continental Europe is represented in the study by 64 companies, not enough to yield reliable findings for any one country. European industry in general shows up well behind the UK and the US in leanness trends but much better than Japan. In such developed countries as Australia, Ireland, and Canada, multinational companies dominate. Hence, their leanness data are largely buried in aggregated financial records of the parent, be it GlaxoSmithKline or Dell Computer. For all companies in the study, about 36 per cent (217 companies) show a strong positive trend in leanness. The other 64 per cent make up the bad news. They’ve stalled or have been fattening up on inventories, some only recently following a long period of improvement but most losing ground for at least 10 and up to 50 years. Strikingly, one of the latter is what may be the world’s most esteemed company: America’s General Electric. That maker of jet engines, electric power equipment, locomotives, and major appliances had its leanest year in 1973 and has lost ground in a valley-peak-valley pattern since. Why, in the midst of lean, supply-chain-management, six sigma, and a host of other potent improvement tools and techniques, are so many companies backsliding or plateauing? An answer suggests itself for Japan. The 1990s were an economic downer for that country. Worsening stock management in so many companies may have something to do with Japan’s cherished, though fading, reluctance to reduce labour. In the face of declining sales, what does an excess labour force do? It produces. It fills warehouses with unsold goods. Outside of Japan, plain old complacency may explain much of the wrong-way trend. Companies and industries are like people; most of us lack the killer instinct. When things are going well we tend to relax. And in the 1990s business and industry in many countries did well. The bubble of enormous fortunes being made as share prices soared, may have cast a wet blanket over the pursuit of best business practices. The high standing of UK companies in the research is hard to fathom. The US should be the Western leader in getting lean. With America’s mass market as the attraction, its industry was the first to feel the brunt of Japan’s export tsunami. By the early

28

The road to world class manufacturing 2002

GLOBAL LEANING

1980s US automotive and electronics industries had begun to react - first by learning and applying the lean, total-quality management methods perfected in Japan, and then restructuring to shed resources that could not cut the mustard. The next arena was the UK which, well before the Continent, had lowered its trade barriers. Straightaway, Japanese automakers set up shop in the Midlands, and Japanese and American electronics companies did so in Scotland. The response of domestic producers was the same as in the US: crash diets. The leanness studies yield plentiful other overall findings, including a ranking of 34 sectors. Among the leaders are automotive components and electronics/electrical products. No surprise, since these industries form the heart of Japan’s export juggernaut, which set lean in motion. At the bottom are food retailers and distributors, textile and apparel, food/beverage/tobacco producers, and petro-chemicals.

In

petrochemicals, capital-intensive equipment spews forth day and night with low regard for demand. At least that would be their excuse for not getting lean. The grocers, 34 out of 34, have no such defence. This is the industry that pioneered barcode scanning, which captures item sales data that is nearly sharable in real time with supply-chain partners. Their stock movements, one might think, would be as synchronised as a ballet troop’s. So, Sainsbury’s and Tesco, and Associated British Foods, what’s the problem? This is not saying that the study findings are conclusive. While the vast majority of companies are privately held, this research covers just publicly traded ones. The companies studied, though, are among the largest and best known. They also must be competitively strong. Otherwise, they cannot attract enough interest in the investment community to issue shares in the first place, and cannot hang on in the second place. The failure of such large numbers of these companies to sustain a lean trend must be seen as looming competitive weakness. It used to be that weak companies might survive for decades. No longer. The open global economy exposes companies to surprise attacks from upstarts near or far. To those exposed, the message here is brief: If your company claims to have lean well in hand but has not maintained improving inventory numbers for at least five or 10 years, you probably don’t. The solutions are not so new, and not confined to operations: Tear down the silos, elevate training, link up externally, involve everyone, and make the measures of performance job-related so as to touch each employee’s work life. Above all, install discipline to make sure that lean is not here and there, not a flash in the pan. It is not very lean if it does not stick. Dr Richard J Schonberger, president of Schonberger & Associates of Bellevue, Washington, is author of Let’s Fix It! Overcoming the Crisis in Manufacturing (Simon & Schuster/Free Press, 2001). He was awarded the British Institution of Production Engineers’ 1990 International Award for an “Outstanding Contribution to the Advancement of Manufacturing Management” and inducted into the 1995 Academy of the Shingo Prize for Excellence in Manufacturing.

The road to world class manufacturing 2002

29

90 day forecast COMPANY A 100 Kg stacks Bi weekly ship

90 day forecast

PRODUCTION CONTROL

COMPANY Z 6000pcs/month 6VF11 - 2500pcs 4VF11 - 3500pcs weekly ship

MRP Daily order

Daily order Weekly schedule

1st & 15th of month

Every friday

Casting

OEE = 38%

10000 Kg Pb 14 days

Plate Manf

80,000 +ve 100,000 -ve

Cell Assy

40,000 +ve 50,000 -ve

Formation

900 pcs 3 days

Final Conf

900 pcs 3 days

Packing

300 pcs 1 day

C/T = 12sec C/O = 2hrs

C/T = 5sec C/O = 4hrs

C/T = 58sec C/O = 2hrs

C/T = 72hrs OEE = 82%

3 people 10 part #

40/pallet 2 people

A/T = 420m

OEE = 71%

A/T = 420m

A/T=1200m

A/T=420m

A/T=420m

MAPPING THE PATH TO LEAN Looking to go lean but don’t know where to start? It’s simple. You start the same way as you would plan any important journey - by using a map. The Manufacturing Institute explains value stream mapping

V

alue stream mapping - sometimes also referred to as ‘learning to see’ mapping or ‘process cartoons’ - has been around for some time. It’s one of the most critical

components to successful lean manufacturing but is often overlooked because it can sound boring and academic. Based on Toyota’s material and information flow mapping, value stream mapping produces an easy to understand visual map that shows you what your customer values, and pinpoints the stream of processes that delivers that value. In other words, how we produce exactly what the customer wants, when the customer wants it, and achieve this with no waste - the essential characteristics of a truly lean organisation. “In manufacturing, when we talk about value, what we really mean is doing something that the customer is willing to pay for,” says Dr Julie Madigan, chief executive of The Manufacturing Institute. “In other words, doing what is required ‘through the eyes of the customer’ and not from the department, function or company’s point of view. Waste is the reverse of value. So if you have components moving around, product queuing or being inspected, or inventory in storage, then you’ve got waste.” Kate Mackle, an associate of The Manufacturing Institute, former vice president and partner of the Kaizen Institute Europe and founder of Thinkflow, agrees. She suggests that manufacturers find the road to lean rocky or fail to achieve the big benefits promised by continuous improvement blitzes because they miss out the first and most important step in the lean implementation journey - value stream mapping. “To be truly lean you need to engage other functions and see the whole picture,” Mackle says. “In many cases companies launch into ‘kaizen blitzing’ in specific areas of production

30

The road to world class manufacturing 2002

VALUE STREAM MAPPING

before they’ve looked at their business from a value stream perspective. Inevitably

Those manufacturers that

what happens is you end up putting a lot of energy and resource into improving parts

have used value stream

of a process that should not even be there in the first place. This has an adverse effect on the sustainability of the lean approach in the business and a tendency to say you’ve

mapping claim to have

done lean rather than are lean.”

halved lead times, doubled

In short therefore, what value stream mapping allows you to do is continue to take waste

stock turns, made huge

out of the business while simultaneously avoiding a lot of wasted effort on isolated improvement activities that have little or no impact.

leaps in labour productivity

Those manufacturers that have used value stream mapping claim to have halved lead

and reduced administration

times, doubled stock turns, made huge leaps in labour productivity and reduced

and co-ordination roles in

administration and co-ordination roles in weeks rather than months or years. So what about the real evidence? The Manufacturing Institute has been assisting a

weeks rather than months

range of manufacturers - large and small and across a variety of industries - with the

or years

value stream mapping approach. Using the support of a master practitioner from the Institute, CHK Engineering, a Cheshire based manufacturer of high-quality metal fabrications, used the Value Stream Mapping technique to reduce lead times from six weeks to two days, reduce stock and W-I-P by 70 per cent and to introduce cellular manufacturing, in less than six months. Says Alan Pinkney, managing director at CHK: “Value stream mapping enabled us to quickly analyse our operation and pinpoint what we needed to focus on for greatest impact. Through value stream mapping it became clear that we were holding excess stock due to overproduction and scheduling changes. We also previously thought that lack of capacity was an issue for us but we quickly discovered that we did in fact have sufficient capacity to manufacture to order and in a much shorter lead time than our current one.” CHK manufacturing director Greg Pointon adds: “The Value stream mapping project also had a positive impact on the workforce. Through involving people from different levels and across the organisation we have noticed that staff now feel more valued. The approach has created a great team spirit within the company.” A cross functional team comprising continuous improvement, planning and customer service, production, and supply chain personnel from Akzo Nobels Akcros Chemicals plant in Eccles, joined the Manufacturing Institute’s How 2 value stream map programme - a practical and action-based programme that combines coaching, ‘learning by doing’ and practical application to the business situation. The programme coach is also on hand to give advice and guidance. Says Terry Hill, site manager at Akcros: “We had already introduced many changes at the site and a radical cost reduction programme was underway. Value Stream Mapping has provided us with a challenging new focus and will support and supplement our cost reduction activity. It has re-focused our thinking and will enable further improvements in performance to be achieved while at the same time improving our overall level of customer service.” The Manufacturing Institute can be contacted on 0161 872 0393 or by email [email protected]

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31

Caterpillar has reached world-class manufacturing status

SEEING THE LIGHT Lawrie Rumens shows how benchmarking can illuminate your way on the journey to excellence eing overtaken by a Smart car on the motorway the other day was an experience

B

that took me through a number of emotions. There was the sheer disbelief. I have

only just upgraded my own car. One might expect the odd Jag or Beemer to fly past but a Smart car was not in my thinking. Then came the urge to do something, before I had thought whether this was really sensible. So I chased after him and overtook him back. My plan that I had set out with plenty of time and did not need to hurry was ignored. Having reacted, I then could not slow down again. I was on a course determined by events. I arrived 30 minutes early and, for my sins, waited in a lay-by with time enough to think how silly this all was. I had my own view of the order of things. The comparisons I was making came from standards set within me. In our world we are used to advertisers using comparisons to spur us on. We believe that if it is possible to have whiter clothes on the line then we should. We target fresher food, and the latest technical bells and whistles, lower costs, and faster, better service.

32

The road to world class manufacturing 2002

BENCHMARKING

Comparisons have a major impact for us too in building new visions of expectancy and aspiration at all levels of the organisation. They add to our own picture of what is possible and stimulate us to do better. More importantly the reverse is also true. As much as our knowledge opens new horizons for us, we are fundamentally constrained by what we do not know. Few of us have the imagination and ability to come up with new ways of doing our business without some sort of stimulus. Sadly the stimulus is often the burning platform. It is a current crisis that gives the imperative to achieve quickly. We usually do achieve, uniting for a brief interlude the directors, managers and our people. The burning platform may be the golden key to introduce rapid change, but it is a blob of putty in unlocking lasting gains and long-term improvement. When we achieve the goals to put out the fire we heave a sigh of relief and take the plaudits. But without greater vision performance flattens out and eventually tails off.

Look inside and outside your

Conversely most journeys to business excellence borne of vision do sustain them-

industry to those where the

selves and companies do continue to improve and stay in front of the competition. Comparison is at the heart of all this since, if we don’t quanitfy differences we won’t

fiercest competition is forcing

understand why they exist. Without understanding, how will we create rational plans

the pace of change and

and actions to achieve excellence? For comparison, substitute the word

improvement

benchmarking. I do not know of a top performing company that does not use some form of benchmarking to understand its competitive position and continually build and develop its vision and strategy. Such companies also use benchmarking to demonstrate to their people at all levels what is possible, and to set goals and targets with them. So where do we start in using benchmarking as a catalyst for our journey to excellence? First comes the voyage of discovery. As companies in the pursuit of excellence, we have to actively seek out the possible. It will not come and seek us. For a start, try reading. Magazines such as The Manufacturer are full of stories and case studies. Add selected books and university papers and a different world starts to unfold. Then it helps to touch and feel. Look inside and outside your industry to those where the fiercest competition is forcing the pace of change and improvement. Be prepared to look outside manufacturing to understand what is the best. For instance the most advanced financial practices are in the financial industries. Thirdly know your market place. Talk and listen to your customers and your suppliers. They will know what is happening in the sector and they will also know whether you are in front or behind your competitors. Where are the customers’ priorities on their journey to excellence, and who do they see as their long-term partner? Now through intelligent conversation agree what is possible in all that you have found and the opportunities this presents to your business. There is little sense in a new vision that drives actions that do not tangibly improve the business. Especially manage

The road to world class manufacturing 2002

33

BENCHMARKING

any people above you not involved in the discovery. Some years ago a very senior person in the glass industry would not accept a target for his operations of 12 stock turns, and the grounds for this were: “tell me someone in the glass industry that has done it”. But there is no point in a vision that someone else has already achieved. With the vision set, we have to sell it and plan the action. If your people do not understand where you are going they cannot contribute. We constantly underestimate what our people can do if they understand our goals. You will need an active programme to get them involved in their own discovery. Get them on best practice visits (try the DTI Inside UK Enterprise service). Send them to conferences and user groups (the Oliver Wight Proven Path is one of the best and longest running of these). Confront them with figures from the many university databases (try Cranfield), and with excellence checklists. Set clear objectives before people go on a visit and debrief the real lessons afterwards. Lastly from the vision set your own priorities from the maturity of your own company. Set in place the foundations on which all other improvements rely. Try these questions: • do your people own what they do and its continual improvement in all parts of the business? • do your people stick to the proper process working consistently whoever is doing the task? • does your top team have one clear agenda, with one set of figures and one clear set of priorities? • does your company plan work properly in all parts of the business and then uncompromisingly work the plan? If these are issues for you then look for experiences showing practices such as 5S and TPM for ownership, ISO 9000 for consistency of work, and integrated business management to get planning and integration right. Do not be bound by your factories. Excellence is the business of the whole business and of the whole supply chain.

Do not be bound by your factories. Excellence is the business of the whole business and of the whole supply chain

Next look to see successes in step changing performance in your targeted areas. Do you know an excellent company that has not actioned lean and process acceleration, driven quality to the highest levels and targeted agility? These initiatives are all company wide and people oriented. The big gains we make in business come mainly from behaviour change yet it is in this area that we invest the least. Education is vital to improving understanding and without understanding there is no real action. At the working level ask whether your people are properly educated to do their jobs well. Can they tell you what is world-class for them in their role and how companies exploit this? Don’t get deflected by the cost of the best education, ask how much ignorance is costing you every day. All of this is benchmarking. Benchmarking is finding out the possible, finding out how to do the possible and stimulating action to get in front and stay in front of the opposition. Benchmarking is not a one-off exercise but a constant way of life that continuously extends knowledge, horizons and of course targets and goals.

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35

LEAN MAINTENANCE Successful lean manufacturing is built on a foundation of self-sufficient work teams, a high level of confidence, and a quick response to changes in demand ompanies that do not consider maintenance or asset management as important

C

will not achieve the full benefits from lean manufacturing. To improve

maintenance and equipment performance requires a comprehensive strategy for asset management. Such an approach will require the use of the various tools and techniques available including total predictive maintenance (TPM), radar coded messages (RCM), continuous improvement (CI), computerised maintenance management systems (CMMS) - used in a way appropriate to the situation and to meet the company’s objectives. What is a maintenance strategy? Quite simply it is the rules, guidelines, methods and practices to be used to achieve a specific goal and/or the manufacturing objectives. An effective strategy will therefore set the ground rules for how maintenance is managed and delivered in an organisation, this in turn will result in substantial benefits which will directly impact on production output and profitability. Typical benefits from organisations that have implemented a structured maintenance strategy are: 1. technical strategy which defines how equipment should be maintained, repaired, replaced 2. management strategy, which defines how the resources are managed. These resources include labour, parts and materials, cost and work management 3. information systems, which define the performance measures, CMMS requirements, plant history, etc

36

The road to world class manufacturing 2002

MAINTENANCE BUSINESS OBJECTIVES CRITICAL SUCCESS FACTORS POLICIES

VALUES MAINTENANCE OBJECTIVES ROLES AND ACCOUNTABLES

TECHNICAL WAYS OF WORKING

MANAGEMENT WAYS OF WORKING

• Asset records • Maintenance approaches • Selection of tasks • Technical standards • Plant criticality • Modification control • Changeovers • New plant design • Safety standards • Legal requirements • Equipment performance • etc

• Organisation and resource planning • Budgeting • Maintenance planning & control • Materials control • Contractor services • Performance management • Communication • Continuous improvement • TPM • etc

INFORMATION SERVICES

An effective strategy will • Asset register • Technical data • Computer system • Audit reports • etc

set the ground rules for how maintenance is managed and delivered in an organisation, this in

Each of these elements must be considered in the context of the plant operating conditions, performance and regulatory requirements. Implementing the strategy will drive best practices while laying the groundwork for achieving excellence in equipment

turn will result in substantial benefits which

and maintenance performance.

will directly impact on

A typical strategy will include the following:

production output and

Generic maintenance strategy model In the last 10 years maintenance performance has improved in some areas, for

profitability

example: a reduction in fire-fighting, increased asset productivity and improved record keeping, but there are still areas of concern including conflict between maintenance and production, integration of CMMS with enterprise resource planning (ERP) systems, focusing attention at high level changes in manufacturing strategy without considering the need for improved equipment reliability.

Benefits • maintenance expenditure reduced • equipment life extended • capital expenditure postponed • spare parts expenditure reduced • increase in utilisation of craft force • reduced equipment failures • more production output • reduced energy costs

Typical industry benefits Pharmaceutical - maintenance costs reduced by 30 per cent Healthcare - £2.4m from improved equipment efficiency Food - savings of £50,000 per day

The road to world class manufacturing 2002

37

MAINTENANCE

Paper - production increased by two and a half times Chemical - £300,000 in maintenance expenditure With maintenance costs typically five to 15 per cent of operating costs the impact of poor maintenance can be considerable. That is why it is important to develop a maintenance strategy. The starting point must be for manufacturing teams to define the goal of maintenance, is it for example to reduce costs, or respond to breakdowns and fix them as quickly as possible, or increase the equipment reliability or meet statutory regulations? In most organisations it will be a combination of all of these. Achieving maintenance excellence will provide the support for superior performance in lean manufacturing while reducing maintenance costs and providing quick wins in terms of equipment performance. So what are the steps required to achieve good maintenance performance? This can easily be divided into 10 steps which will deliver maintenance excellence driven by a maintenance strategy. A key part of any maintenance strategy is likely to include the use of a CMMS, whether this is a stand-alone system or a maintenance module, which is part of a business wide ERP system. The CMMS should provide the glue which holds the strategy together and makes fact-based decisions that much easier.

By developing and

To gain the maximum benefits from the CMMS it is essential that the existing processes are reviewed and revised in line with best practice. This is something a

implementing an effective

CMMS supplier will not always include, after all they are software specialists not

comprehensive maintenance

maintenance specialists. Without this element there is high risk that the system will

strategy, maintenance can become a value added function, which fully supports lean manufacturing

not deliver and will be under utilised. Implementing an effective maintenance strategy will take time and resource. Typically an implementation time frame will be one to two years for all but the smallest organisations. The starting point of implementation is to prepare a strategy roadmap, which sets out the objectives, goals and milestones for each element of the developed strategy. For many years maintenance has been recognised as a cost on production. By developing and implementing an effective comprehensive maintenance strategy, maintenance can become a value added function, which fully supports lean manufacturing.

Ten step approach to strategy development: Step 1

Recognise the need for change

Step 2

Assess current weaknesses through AMIS auditing and benchmarking

Step 3

Define the maintenance workload

Step 4

Map and revise maintenance processes

Step 5

Establish appropriate organisation structure

Step 6

Define work, cost parts and resource management systems

Step 7

Prepare standard operating procedures

Step 8

Establish key performance indicators and continuous improvement system

Step 9

Define people requirements in terms of number, skills training

Step 10 Select the appropriate tools and techniques and methodologies to drive improvements in performance

The road to world class manufacturing 2002

39

Cisco successfully manages outsourced manufacturing

THE VITAL LINK Stephen Proud looks at supply chain challenges in collaborative manufacturing n little over a decade, advances in supply chain management have transformed the

I

way that many manufacturing businesses operate. The impact has been huge. But

the period of greatest change may still be ahead of us. The focus of supply chain management is changing from the effective movement of goods, to a more challenging mission: redefining the whole manufacturing process. Functions that were once routinely handled in-house are now routinely outsourced to parts of the supply chain that are supposedly better equipped to perform them. Why design parts and components in-house, runs the argument, when those parts and components can be better and more cheaply designed by the companies that manufacture them? Why shoulder the entire risk in a new product or project, when effective supply chain management allows that risk to be shared collectively between the businesses that make up the supply chain? And why - most radically - manufacture in-house at all? Why not simply outsource the whole business to a third-party contractor, leaving you free to concentrate on brand management and marketing? It’s a compelling notion, in a world where exploiting a core competency, whether your

40

The road to world class manufacturing 2002

SUPPLY CHAIN

own or that of a supply chain partner, can bring new products to market faster, more cheaply and more reliably. Accenture’s research(1) shows manufacturers are moving towards collaborative working and outsourcing. In one study, over two-thirds of European manufacturers surveyed had implemented a collaborative product development (CPD) initiative. A separate study into the automotive industry continues the trend with suppliers and original equipment manufacturers (OEMs) looking to outsource production and move upstream into new areas of revenue creation. Some leading companies such as Dell, Cisco and Sun have challenged the art of the possible and prospered in this arena. But problems lie ahead for those that seek to emulate them, particularly in businesses less attuned to the risks and decisions involved. Let’s look at some of the risks. The lead time for the capital infrastructure required for such a project is often longer than the engineering design and prototyping that is needed, so it’s the provision of capital infrastructure, and the investment that requires,

With 50 per cent of the budgeted hours or

that often becomes the critical path constraint.

resources consumed, one

The trouble is that the investment decision has to be made and funding put in place,

might imagine that there’s

before the product has completed its design stages, but most companies are loathe to commit funds and resources until they see an order.

50 per cent of the task left

Another obstacle often surfaces at this early stage of a collaborative or supply chain

to perform. In the real

outsourcing project. The decision has been made; the investment capital sought, and

world life isn’t so simple

from the engineering and manufacturing perspective it’s all systems go. But beware: in many cases, this additional capital will be far bigger than most capital investments the company has made and will have strings attached. Financiers and venture capitalists will want seats on the board or, at the very least, strict financial controls and management information. Few companies have either the experience in dealing with this kind of external scrutiny, or the collaborative project management and financial systems that external investors want. In such cases, a common pitfall is the estimate-to-complete calculation. With 50 per cent of the budgeted hours or resources consumed, one might imagine that there’s 50 per cent of the task left to perform. In the real world life isn’t so simple: resource estimates to complete a project are notoriously hard to get right. At the management level, it’s possible to be relaxed about an over-run - but from an external investor’s perspective, the viewpoint is less sanguine. The next trap for the unwary is where a customer or supplier is experiencing trouble. Instead of supplying widgets, they may be supplying whole assemblies, and finding it’s trickier than it looks. Costs are high, delays and quality problems endemic. Most purchasing functions, for example, are designed to place orders, not manage service providers or project-manage arm’s length ventures, so you might never spot the problem, until it’s too late. The underlying point is this: in collaborative supply chain projects, the risk profile is different. A chain is as strong as its weakest link. And that link can be hard to spot.

(1) Pan-European Collaborative Product Development Survey 2001 Collaborating to Compete: A New Way Forward. Auto 2010 in the United Kingdom, Preparing for the Future Today

The road to world class manufacturing 2002

41

PEOPLE AT THE CENTRE People are the essential ingredient of success. John Philpott, looks at the role of HR in world-class manufacturing espite the decline in the total number of people employed, the manufacturing

D

sector remains the foundation of our economic productivity, and much of what we

have learned about work organisation and employment practice comes directly from manufacturing. It’s hard to believe that once work was organised around the Fordist model where the focus was on mass production, rigid bureaucracy and hierarchy. In today’s manufacturing world, the model, while still concerned with efficiency, is much more about being versatile and flexible with work organised around smaller scale operations. The best manufacturers have recognised that success is about offering customers exactly what they want and in some cases going beyond expectations. But we know that we have not come far enough. Manufacturing may still be the jewel,

44

The road to world class manufacturing 2002

HUMAN RESOURCES

but in many companies the shine has gone as they struggle to compete with the best in the rest of the world. They may operate on post Fordist lines - but they have not yet stepped up to the next stage: a radical rethink of work organisation. The manufacturing workplace is greatly changing for the better - from an environment of top down control and hierarchical organisation to one of teamworking and flat structures. But the consensus within business and government is that these new styles of working are not happening quickly enough. People management is critical. It can apply strategies and practices that enhance the value and contribution of employees. Here the move is from traditional disciplinary and personnel administration to a model of strategic human resource management. But above all this is a management challenge - the ability to exploit the knowledge and creativity of people must become a mainstream capacity for anybody with a responsibility for leading others. The business model that has people at its centre has three central tenets: leadership,

Effective leadership

employee engagement and continuous learning. At first sight these three strands

galvanises the creativity and

appear straightforward - but dig a little deeper and we can see why companies are failing to grasp their importance. These people practices need to be understood, put in

enthusiasm of employees,

place and managed in a systematic manner, but if unco-ordinated, they will fail to

leads to new solutions,

make a significant impact on business results.

faster use of technology,

In the HR profession these practices fall under the collective term of ‘high performance working’, and were designed to drive organisations toward higher performance, to lift

more and superior

them out of the ‘me too’ world of supply-led, mass production. An approach that is

applications and delights

often underpinned by competing on cost alone - and one which is doomed to fail as

customers

long as there are overseas manufacturers delivering at lower cost. Leadership is often misunderstood to be a quality needed only by those at the top of the organisation. In fact leadership means that everybody in an organisation takes responsibility and makes a contribution to the success of the organisation. It is the most single critical component in the high performance workplace. Many companies fail to link management development with the organisation’s overall objectives; whatever route an organisation looks to pursue, leadership and management development must be in sync with its aims. Effective leadership galvanises the creativity and enthusiasm of employees, leads to new solutions, faster use of technology, more and superior applications and delights customers. It must become a mainstream skill in our manufacturing sector - without it, companies will find themselves without the capacity to deliver long-term success. The second tenet, employee engagement, is perhaps the toughest nut to crack. Getting employees on-side and contributing because they want to and are motivated to do so, is a preoccupation of most HR departments. In the manufacturing sector, the traditional ‘them and us’ culture, while no longer rooted in the conflict that characterised earlier decades, is still an undercurrent for many employers. The Chartered Institute of Personnel and Development (CIPD) has spent many years examining the mutual expectations that employee and employer have of one

The road to world class manufacturing 2002

45

LEAN MANUFACTURING

another. It is based on trust. Many employers pay lip-service to this contract, by saying the right things, some go further by doing the right things and some ignore it and just get on with the business of production. The survival instinct is what drives them. But they ignore it at their peril. Many of the expectations, such as fair treatment, just reward for labour and a certain level of job security, are informal. In an ideal world they would not be left to chance, but in most organisations the psychological contract works by unplanned and intuitive means. This is fine - as long as it is positive. But companies that damage the psychological contract are doing irreparable damage. People come to work to do a good job and contribute. In return they expect their bosses to provide leadership, to help them grow and develop and treat them like adults. Another critical aspect of employee engagement is consultation and communication. When individuals are confident that their views are taken on board, they are much more likely to contribute willingly. The knowledge that companies have inadvertently encouraged employees to keep to themselves is increasingly where critical value lies. Getting at this knowledge, maximising it and putting it to work is the 21st century work challenge. Of course, all organisations have formal and informal groups brought together temporarily to complete a specific project or work together on a long-term basis. But creating a knowledge sharing culture involves taking a systematic approach to the use of such groups. Finally, the third tenet, continuous learning, is an essential characteristic of the high

Employees are no longer

performing workplace. It is the development of workplace learning in the context of new competitive pressures. Research also shows that if companies want their people

hired hands who leave their

to make the contribution that sets them apart from the competition, they must ensure

creativity at the factory gate.

that individuals are given work which they find stimulating and satisfying as well as

In progressive companies

being given the opportunity to develop the skills to do this work well. Progressive companies are recognising that learning in the workplace should also

they are highly skilled,

embrace many less-formal activities - team development, action learning, knowledge

flexible and fully

sharing and knowledge management. These activities occur in the workplace day by

contributing associates

day, as people learn on the job, perfecting their skills, finding new ways of working sharing knowledge and passing on skills to fellow workers. We now have proof that a planned approach to people boosts performance in manufacturing. The CIPD report, The Impact of People Management Practices on Business Performance finds that 18 per cent of variations in productivity and 19 per cent of variations in profitability are accounted for by people management practices. Employees are no longer hired hands who leave their creativity at the factory gate. In progressive companies they are highly skilled, flexible and fully contributing associates. Good people management holds the key. It is not a silver bullet - but it’s the only way to stand any chance of a sustainable, successful future. John Philpott is chief economist at the Chartered Institute of Personnel and Development

The road to world class manufacturing 2002

47

MCP

Gaining through good maintenance Richard Jones, managing director of MCP Management Consultants shows how establishing a maintenance improvement process can deliver real benefits in support of lean manufacturing

48

aintenance has always been a dirty word (with little attention

M

risen from 79 per cent to 82 per cent while availability remained at

paid to it) in most organisations, except to use it to achieve

85 per cent and machine utilisation increased from 40 per cent to

cost savings by reducing maintenance budgets. With the rush

54 per cent. The average value of overall equipment effectiveness

towards a lean environment companies must now consider how to

(OEE) of 40-50 per cent found in UK factories is a long way from

manage their physical assets in a much more effective way. Good

the best performers at 80-90 per cent. This latter figure highlights

asset management including maintenance will pay dividends, with

the fact that most companies have spare capacity that they

benefits to the business of 10-15 times the current mainten-

probably don’t know exists within their plant.

ance expenditure.

MCP’s own data from organisations participating in the AMIS

The MCP sponsored Boardroom Report of 2000 identified that

programme also shows that while there has been a significant

certain features of maintenance management had not significantly

increase in tools and techniques and the use of computer systems,

changed since a previous survey in 1991. A comparative ranking of

overall equipment performance and efficiency have not substantially

‘causes of dissatisfaction’ within maintenance departments

changed.

identified ‘conflict with production departments’ as the main source

Before rushing out to buy a CMMS or embrace lean manufacturing

of concern in 1991 and 2000. If this is such an issue how can lean

it is important to get the basics right. The basics in this context are:

manufacturing be successful?

• A clear purpose and objectives for maintenance

Lean manufacturing seeks to use less of everything by eliminating

• Effective technical strategies for equipment reliability

non-value-added waste in the production stream and driving down

• A strong work planning system

batch sizes. Lean manufacturing is about making what customers

• Good spare parts management

want to the quality and quantity they require. How can you deliver

• Accurate cost information

these customer needs without a close look at maintenance and the

• Use of key performance indicators and continuous improvement.

important part it plays? If the machine breaks down and there is no

The development of an effective approach to maintenance follows

spare part and few skills to repair it - what do you do? You have no

a three-stage methodology: assessment, development and

stock of finished goods to send to the customer so you have an

implementation - shown in figure 1.

unhappy (and perhaps lost) customer. Lean manufacturing

The assessment step involves understanding the current status of

requires a total business approach, which considers physical

maintenance and equipment performance. This can be achieved

assets and their management as a key element for its success.

through the use of the DTI recognised AMIS audit service. From

Major organisations such as Glaxo SKB, Cadbury, Nestlé, and

this evaluation an action plan can be developed, this plan will

Johnson & Johnson now recognise that maintenance is a key

include all or most of the activities identified in the develop-

element of their businesses and they have clearly defined strategies

ment/planning stage, that is, work planning, equipment strategy

in place that enable maintenance to support their manufacturing

etc. This will require the development of methods, procedures and

operations. In terms of plant performance, machine efficiency has

ways of working. These are best developed with the people who

The road to world class manufacturing 2002

Figure 1 Group manufacturing & maintenance strategy

Business case validity

Equipment technical strategy

Maintenance plans

Cost savings realised

Work planning Cost management

Action plan

Develop site road map

Site approval

Spare parts management Operator asset care/TPM CMMS implementation improvements Skills, training analysis Continuous improvement techniques

Assessment

Development/ planning

Manufacturing improvement Standardised processes & procedures

Cost avoidance

Consistent ways of working

MANUFACTURING EXCELLENCE

Quick wins Evaluate current state

LEAN MANUFACTURING

Organisation structure

Continuous improvement techniques

Execution/implementation

will be using them, so a team approach is recommended. Finally,

such values may seem unbelievable they are readily available within

there is implementation. It is at this point that the benefits will be

a matter of months. Improving maintenance can generate increased

generated. By adopting a total approach looking at both main-

profitability, but taking a total approach will provide benefits and

tenance systems as well as equipment and production methods, the

savings which will cover the initial investment many times over.

benefits stream will be much greater. For example, by improving work planning an increase in craft utilisation will be achieved. But how do you turn this into hard cash? By looking at equipment changeovers, running speeds, packing methods and machinery design, the savings can be obtained

BEFORE RUSHING OUT TO BUY A CMMS OR EMBRACE LEAN MANUFACTURING IT IS IMPORTANT TO GET THE BASICS RIGHT

virtually immediately with little additional cost. Improving maintenance systems will produce benefits in the medium term. Improving machine and equipment management will produce benefits in the short term. How do you measure these benefits? Perhaps the easiest way is through the use of OEE (overall equipment effectiveness). If a business with a turnover of say £50 million working three shifts has an OEE of 50 per cent, by raising the OEE value to 75 per cent it would be able to produce an

MCP Management Consultants Ltd 2 Holt Court North Aston Science Park Birmingham B7 4AX Tel: 0121 693 9313 Email: [email protected] Web: www.mcpeurope.com

additional £25 million worth of sales or reduce by one shift. Whilst

The road to world class manufacturing 2002

49

OLIVER WIGHT

The journey to excellence Lawrie Rumens of Oliver Wight EAME maps out the route to enterprise-wide excellence though integrated change management

50

o how much did your new system cost? I had a boss once who

S

processes and people. With these three factors operating in

spelt the dreaded word as ‘Komputers’ because everyone quoted

harmony, businesses can reach new heights of performance.

him prices in £K to make it seem cheaper. As time has moved on so

However this integration alone is not enough. For instance, what did

has the alphabet and now all too often the letter after the figures is

TQM do for your company? It probably provided focus. It started a

£M. Whatever this figure, move the decimal point one place to the

culture change. It was a platform to involve people and tap their

left to see the amount companies spend on designing new processes

knowledge, and it stimulated improvement projects throughout the

to take advantage of the new systems. They then move the decimal

business. All of this is good stuff yet did it really step change the

point a further place for the training and education budget to support

performance of the company in the eyes of its stakeholders?

change and implementation.

For TQM read any of the more current themes such as lean, six

What about the other side of the equation? There are huge gains to

sigma etc. Senior management spends vast sums on initiatives like

be made in most companies by aggressively pursuing change from

these, which promise and offer so much. But without joined up

the boardroom through the organisation. The Board ultimately

thinking from the top through to every team involved, they yield little

decides what it wants the company to be in the future and its per-

reward for the effort. For effectiveness in change management we

formance. It is they who set the goals and ambitions and therefore

need the new process of integrated change management.

determine the pace of change and the business gains.

At Oliver Wight we see three main elements of this process.

Where do the gains come from? In our opening example the

First, those at the very top of the company and business unit set

system tool will bring its own gains in cheaper faster computing, in

out a clear vision of the future and plot the journey to it, from the

support IT costs, and in replacing simple admin tasks. Move the

current real world. This process sets clear projects and initiatives,

decimal point to the right for the gains in companies prepared to

prioritised to ensure focus of activity and the best chance of success

engineer new processes to take advantage of the new investment.

and reward. Do not underestimate the complexity of this process nor

Move it to the right again for companies prepared to drive change in

its demand on people and their behaviours. Most companies defeat

behaviours and in company culture to take real advantage of new

the process by being too impatient for the action. For the strong

systems and processes.

minded and powerful people at the top of our organisations the

The biggest differentiator in business is people. Indeed as we get

exercise sets new standards in listening skills, in trust and openness,

more sophisticated with better and faster tools at our disposal, the

and in plain speaking without the politics. It makes clear that in

impact of our people getting it right or getting it wrong gets greater

the pursuit of change, everything must change including the person

and greater. Equally in change management programmes, the largest

at the top. Independent facilitation can help to make this painless

contributor to gains is our people, yet it is in this area that we invest

and very rewarding.

the least in time and money.

Second is implementing each of the identified projects in priority

The greatest success for all stakeholders through a journey to

order, such as an ERP implementation, installing integrated business

excellence comes from the integration of investment in tools,

management or gaining IIP. For success in each project you will

The road to world class manufacturing 2002

VISION, CREATED FUTURE & SIZE OF GAP

DISCOVERY

AWARNESS & UNDERSTANDING

CREATE EXPERTS & 'AGENTS OF CHANGE'

INVESTMENT IN SKILL DEVELOPMENT & BEHAVIOUR CHANGE

UNDERSTAND BENEFITS DEPLOYMENT PLAN

IMPLEMENTATION

REDESIGN

ALIGNMENT TO VISION

LEARN BY DOING

REALISATION EARLY BENEFITS

0 need an established management process. The longest standing of

3. Use an integrated change management process to bridge

these is the Oliver Wight Proven Path.

between the company goals and the actions taking place

This is a process proven over hundreds of cases, all over the world,

throughout the organisation.

taking you on a specified journey from discovery, through design, and

4. Enlist expert support in coaching and facilitating at all levels. You

into implementation. Applying the right support, education and

should not pay for armies of bright young consultants to redesign

knowledge at the right time fast tracks companies to radical new

your business for you. Help your people at all levels to help

ways of working.

themselves. Planned education and facilitation changes the per-

Thirdly, within each project there is tremendous opportunity to step

ceived boundaries, shortens the time for success and substantially

change performance of a team or a business process with lean and

changes people’s views of what is possible.

agile thinking. We need to stimulate people to design their own

Integrated change management is the surest and fastest route to

practical new ways of working which fit with the gains and plans

success, driving change from the top. With the overall direction and

elsewhere in the business. The familiar path goes from brainstorming

goals firmly in place it provides co-ordinated action throughout the

to designing and implementing a new value streamed process.

organisation, and full line ownership.

All three elements of integrated change management have things in common. They contain their own journeys from discovery to action at different levels of the business. They revolve around the use of people’s knowledge and understanding. They require clear ownership and engagement by line managers from top to bottom of the organisation. They are better for independent knowledge-based

AS WE GET MORE SOPHISTICATED WITH BETTER AND FASTER TOOLS AT OUR DISPOSAL, THE IMPACT OF OUR PEOPLE GETTING IT RIGHT OR GETTING IT WRONG GETS GREATER AND GREATER

facilitation and coaching. So what are the lessons for companies embarking upon change? 1. Understand the role and value of people in change management. Ensure that you give full weight to the people issues in the integration of tools, processes and people. 2. Support line people with education as well as training. Education extends their understanding of what is possible and what you intend and want to happen. Education is the most undervalued factor in change management.

Oliver Wight EAME LLP The Willows The Steadings Business Centre Maisemore Gloucester GL2 8EY Tel: 01452 397200 Fax: 01452 397230 Email: [email protected] www.oliverwight.com

The road to world class manufacturing 2002

51

Aiming high Papilio sets its initial sights on the senior managers. Colin Janes explained to Colin Browning the idea behind the thinking hen it comes to lean manufacturing, there is a big difference

W

There is no doubt that the Papilio team has a powerful pedigree

between those who walk the walk and others who just talk

behind it when it comes to lean and six sigma. All the company

the talk. In recent years the term lean has been on everyone’s lips

directors attained their skills in some of the most challenging and

and all are claiming to be implementing a new way of working. But

leading companies, namely Ford Motor Company, AlliedSignal and

scratch the surface and another picture emerges. A great deal of

Honeywell. This pedigree is not just in the technical knowledge and

what is being done in the name of lean manufacturing is little short

application skills required for lean and six sigma, but also in the

of superficial. Sure, savings are being made but the root and

industrial and academic experiences, where theoretical advances

branch changes needed to really drive things forward are simply

combine with practical application.

not there. One company not afraid to tell

Papilio has been operating for nearly two

it like it is, is Papilio, one of the fastest

years now and word of mouth has proved

growing training and implementation

to be a brilliant catalyst for growth. “Our

organisations in the country.

clients tell us the reason why they like us

The big problem with introducing a

is because we do not stop at the iden-

strategy of lean manufacturing does not

tification and training stage,” explained

stem from the idea itself. It is generally

Janes. “All of us are hands on practi-

accepted that producing more with less

tioners and we help the clients with the

is a good way of strengthening a bus-

roll out of the new lean environment. Our

iness. The largest obstacle comes from

approach is often characterised by a

the way people approach the task. Surely,

down to earth attitude and a willingness

the argument goes, we know our

to get our hands dirty.”

business best therefore we should be

The Papilio grapevine has now spread far

well placed to identify areas needing

and wide. Helped by the business brought

treatment. The two faults with this

52

in via the company website, turnover has

argument are first it often needs an independent eye to see the big

now reached £500,000 a year and is still growing. When the four

picture and second, it is easy to slip back into the old ways. Not

directors struck out on their own they saw their target market as

only will the team from Papilio identify potential changes, they aim

being mainly in Europe. While the EU accounts for much of what

to ensure the full benefits are achieved in the long-term. “As far as

Papilio does, it has also found itself active much further afield. The

we are concerned, it is a three stage process,” said Papilio director,

company has activities in some of fastest growing and developing

Colin Janes. “Training is easy, deployment is more difficult but to

regions such as Egypt, Saudi Arabia and Asia as well as some more

get the full benefit one needs to put a mentoring scheme in place.

developed, but equally aggressive and demanding territories

Then its begins to solidify.”

including USA. The expansion of the company is all the more

The road to world class manufacturing 2002

remarkable when one considers, as Janes does, that: “We are

then able to add further value to the client’s business by blending its

selling a product people do not think they need until it is too late. By

people skills with training and implementation programmes. The

the time they call us it can be a matter of survival.”

whole package is further enhanced by the strategic partnerships the

When a company calls on the services of Papilio the key factor is

company has formed. It works closely with a software developer

making sure the top team are fully on board: management buy in is

and a networking/recruitment company specialising in lean and six

crucial. One way to do this is for Papilio to identify an area of

sigma such that it can offer the client a differentiated and enhanced

immediate return. Having demonstrated the practical benefits of

value proposition beyond training and consultancy.

lean manufacturing Papilio has won half the battle. But these

So whether Papilio is with a company for six months or two years,

changes do not take place on their own, they will need to be driven.

it can depart safe in the knowledge that it leaves behind a business

Once the boardroom is sold on the idea, the enthusiasm can

much better placed to face the demands of the modern world. The

cascade down an organisation. However, there are things which

business is better able to cope with competition from emerging

Papilio is particularly wary of.

nations and other demands in the global economy. Buying into the

“Part of the outcome of introducing lean techniques is that you can

Papilio business model adds value. All one has to do is change the

do the same with fewer people,” said Janes. “This is great if a

way one thinks about manufacturing.

business is expanding and can redeploy people to other profitable activities. It can be bad, though, if some end up being laid off. What is certain however is that if lean manufacturing is introduced simply to get rid of people, it is doomed to fail.” The reasons for this are self-evident. Lean manufacturing is a cultural change and that requires workforce co-operation. That co-operation is unlikely to be forthcoming if the staff feel themselves under threat. But while much of the day to day Papilio work is concerned with

A GREAT DEAL OF WHAT IS BEING DONE IN THE NAME OF LEAN MANUFACTURING IS LITTLE SHORT OF SUPERFICIAL. OUR CLIENTS TELL US THE REASON WHY THEY LIKE US IS BECAUSE WE DO NOT STOP AT THE IDENTIFICATION AND TRAINING STAGE

lean manufacturing, one should not ignore the other side of the service it offers. Alongside lean techniques, Papilio is also able to bring six sigma philosophies to its clients. So while lean manufacturing concentrates on doing more with less, six sigma aims at improving quality by reducing process variations. As far as Papilio is concerned, the two go hand in hand. By offering this combination of lean manufacturing philosophies alongside six sigma thinking, Papilio is able to provide its clients

Papilio Limited Rainbird House Warescot Road Brentwood CM15 9HD www.papiliolimited.com

with a powerful new business tool. From this strong baseline, it is

The road to world class manufacturing 2002

53

PRODUCTIVITY EUROPE

Overcoming learning barriers Malcolm Jones, director of Productivity Europe, examines the pivotal role of learning in the road to world class manufacturing

54

n the huge literature on World Class Manufacturing - some of it

I

lay at the root of 95 per cent of their production issues. It has been

excellent, some mind-numbingly tedious - one book by a Japanese

noted that the fundamental difference between craft and mass

researcher has inspired me in recent years. Takahiro Fujimoto’s book

production is the existence of process standards in the latter.

The Evolution of a Manufacturing System at Toyota is different not

Unfortunately, this often passes us by, with the result outlined above.

only because it is based on interviews with the people who developed

Routinised Learning is the existence of standardised problem

the Toyota Production System, but also because of the evolutionary

solving methods which were consistently applied as part of the

framework which actually makes sense of how TPS happened.

production process. This was the basic QC story approach. If

Fujimoto’s theory explains how TPS evolved out of the vision

we want to give routinised manufacturing combined with

of Kiichiro Toyoda, coupled with

routinised learning a name, then

the drive and experimentation of

we can just call it kaizen, contin-

Taiichi Ohno, and how it is

uous improvement (Ohno told

still evolving today. It is able to do

Fujimoto that he told workers

this, not because Toyoda and

that if they did not improve the

Ohno had a fully fledged system of

process, then they were stealing

lean manufacturing which they

money from the company!).

implemented, but because they

Opportunistic Learning, on the

had ideas and concepts which

other hand, is the capacity to

they experimented with, and some

learn through experimentation,

of

have

which is much of what Ohno did

competitive advantage in their

in the 50s and 60s. Protected by

which

proved

to

particular situation.

the Toyoda family, whose vision he was enacting, Ohno was able to

So when people, particularly consultants, propose to ‘implement a

almost literally ‘see what works’, and because of the routinised

world class manufacturing system’, I tend to get a little twitchy.

culture at Toyota, he was then able to spread successful

From my perspective, Toyota became pre-eminent in the manu-

innovations more quickly and consistently throughout the

facturing sector not because it had lean manufacturing, but because

organisation. Opportunistic learning created the innovation, but

it was able to learn. Fujimoto in fact identifies three capabilities:

routinised learning helped maintain it.

Routinised Manufacturing is simply the fact that it had a culture

Ed Schein, another famous organisational psychologist, notes that

based on process standards. I have literally lost count of the

change happens when learning anxiety (our fear of trying

number of times problem solving teams have reported that the root

something new) is less than our survival anxiety (our fear of the

cause of problem x was traced back to the lack of a process

consequences of staying the same). Others have noted that

standard. One major UK plant reported that a ‘standards’ problem

learning ability is the only sustainable competitive advantage (I

The road to world class manufacturing 2002

have read economists who have even proved this using

vision to determine what capabilities you need to develop. The only

econometric models). What, then, stands in the way of learning?

option which no longer exists is the proverbial ‘Jack of all trades’ -

Daniel Kim, an affiliate of the Society for Organisational Learning

we must be masters of at least one.

who has also worked with large manufacturing concerns such as

The Toyota approach to situational and fragmented learning barriers

Ford and Harley Davidson, identifies three barriers. Firstly there is

lies in the routinised manufacturing and problem solving systems.

the situational learning barrier. This stops us generalising from our

Our approach is therefore to help companies develop reliable

experience so that we can apply the learning elsewhere. We have all

standards and reliable improvement approaches. The most

come across the excuse ‘but we are different’ when talking about

powerful tool in breaking down these barriers is visual management

implementing new concepts. This is the situational learning barrier,

out on the shopfloor, hence the emphasis on activity boards as well

the inability to take generalised learning from specific situations.

as performance boards and the use of small groups for all

Then there is the fragmented learning barrier.

improvement

This is when

activities,

together

with

presentations

to

individuals learn and organisations don’t. This is perhaps the

management, and indeed to customers and suppliers.

greatest challenge for believers in the ‘learning organisation’ of

The body of knowledge which exists on lean manufacturing, total

which I am one.

quality and total productive maintenance techniques is vast; the

Finally there is the opportunistic learning barrier, our inability to

issue is not finding out about world class techniques (it would

capitalise on opportunistic learning. 3M is held up as an exemplar

probably be harder to hide from them), it is developing your own

of opportunistic learning capability, particularly in product

vision of where you want your company to be, and then developing

development and the famous example of the Post-It note. But we

the learning infrastructure to get there.

need opportunistic learning capability at all levels, in process as well as product development. In helping companies on the Road to World Class Manufacturing, I see our task as a simple one (I didn’t say it was easy) - helping

THE ABILITY TO LEARN IS THE ONLY SUSTAINABLE COMPETITIVE ADVANTAGE

people develop a vision of how different they want to be to how they are now (a positive form of survival anxiety) and then helping them develop learning infrastructures for the journey. The function of the infrastructures is to overcome the barriers identified above. By a manufacturing vision, I mean what kind of company we want to be - a high price, high quality integrated supplier to a specialist market with superior design capability on the one hand, or a hyperefficient, low cost, short leadtime producer on the other. Both, or

Productivity Europe Saturn Facilities Manton Lane Bedford MK41 7PH email: [email protected] www.productivityeurope.org

any combination in between, are plausible, but there must be a

The road to world class manufacturing 2002

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