Cost-worthy Change Through Lean Manufacturing

The implementation of lean processes in manufacturing can significantly lower operating costs while substantially boosting profits, an industry expert told business leaders recently.

“In the last eight years our sales have gone from $13 billion to $25 billion and our cash flow has tripled each year, said Ray Keefe, vice president manufacturing at Emerson Electric, speaking at the Valley Industrial Association’s 2008 Economic Luncheon at White Eagle Country Club in Naperville.

Lean manufacturing is an improvement methodology that dates back to the 19th century but still applies to today’s market. It’s based on eliminating waste, in all forms, and streamlining a business from top to bottom, which has proven time and again to increase productivity and enhance the bottom line.

Many factors define lean manufacturing, some of which are value stream management, establishing foundations, employee engagement, identifying variations using the Six Sigma tools, supply chain execution, demand management, and planning and scheduling excellence, said Keefe.

In order to execute these initiatives, a company or corporation must begin at the marketing and sales level.

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marketing is having what the customer wants when he wants it, while sales is convincing the customer he wants what you have, said Keefe.

“In lean terms, if you do the marketing right you have a natural pull to the system, Keefe said. If you’re trying to do the sales, you’re trying to push (your product) on someone.

Trying to push lean anywhere on any business, it’s like pushing a real heavy load if you don’t have the marketing set up.

The first step to successful marketing is identifying those customers, both internal and external, to whom the lean enterprise is to be targeted, such as executives, employees, investors, customers and suppliers.

What we want to make sure we do is satisfy each and every one of our customers along this journey to create a natural pull system, said Keefe.

He emphasized that marketing a lean enterprise is marketing change.

People are naturally resistant to change, so you have to be able to market change. It’s not just tools and techniques, it’s organizational and behavioral change.

He cited five items that must be present in order for change to happen and to be sustained:

  • Incentive—a clear, consistent reason why change is necessary.
  • Vision—what is being changed and what is necessary to make that change.
  • Action plan—identifying and clearly presenting to all involved parties when and how fast change will happen.
  • Skills—training and education to give employees the ability to participate and be involved.
  • Resources—consistent allocation and application of resources.

The key to this change model is that if any one of these elements is missing in your change effort then something bad is going to happen and an organization will become resistant to change, said Keefe.

For example, if a clear incentive isn’t present, the process will be very slow, because if there isn’t a compelling reason to change, people won’t work very quickly at it.

A lack of vision creates confusion.

People will not want to participate if they don’t understand where you’re going and how you want to get there, Keefe said.

Without an action plan there are false starts, which will continually set a company back.

If those involved do not have the necessary skills, then it creates an element of fear.

If you can educate and train people you can reduce the fear component, said Keefe.

Finally, without proper and consistent resources, there will be endless frustration.

Keefe said it is necessary to develop and present incentives patterned to each particular customer in order to help persuade it to fully accept a lean enterprise.

With executives, he said, it’s important to show how changing to a lean enterprise does not involve as many business risks as they may initially assume, as well as how the change will affect their place in the stock market.

Executives get very engaged when they hear these types of ideas, Keefe said.

To employees, the term lean is invariably associated with fears about job security, which can stunt the growth of a lean enterprise.

Change is exciting when it’s done by us, threatening when it’s done to us, said Keefe. So we use a lot of education and training for our whole corporation to help people see the vision and also give them the skills to be able to actively participate in the hands-on part of the change.

Investors are satisfied only by results, and those results must relate to what the investors were initially told they would receive, specifically in terms of earnings.

Say what you’re going to do and do it, Keefe said. By saying, doing and performing, the investors see that the consistent application of resources being used to make something different happen is actually working.

For customers, trust must be built through systematic change that is focused on enhancing service levels, said Keefe. This can be augmented through collaboration and cooperation with customers.

We’re doing joint value stream maps with customers, called value chain mapping, so we can see on both sides of the table, he said. It’s usually quite an eye opener for both sides. Most of the time we’ve found it’s a lack of communication and information that’s the problem.

Value chain mapping is also useful when presenting incentives to suppliers.

We want to help them improve their performance to the point where they become premiere suppliers, Keefe said. What can we present to our suppliers that will make them really want to work with us and participate in the long term?

In essence, lean enterprising is only successful when everyone involved accepts the idea and then works on the same page toward a clear and necessary goal.

If we can all be singing off the same sheet of music, we’re in much better condition, Keefe said.

Source: Jeremy Stoltz, Staff Writer, The Business Ledger

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