Lean Production for Competitive Advantage

A Comprehensive Guide to Lean Methodologies and Management Practices, Second Edition

John Nicholas

• Publisher: Productivity Press
• Year: 2018
• ISBN:
  9781498780919
• Edition: 2
• Topic: Business
• Subtopic: Operations
• Index: Business

Lean Production for Competitive Advantage: A Comprehensive Guide to Lean Methodologies and Management Practices, Second Edition introduces Lean philosophy and illustrates the effective application of Lean tools with real-world case studies. From fundamental concepts to integrated planning and control in pull production and the supply chain, the text provides a complete introduction to Lean production. Coverage includes small batch production, setup reduction, pull production, preventive maintenance, standard work, as well as synchronizing and scheduling Lean operations. Detailing the key principles and practices of Lean production, the text also:

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• Illustrates effective implementation techniques with case studies from a range of industries.

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• Includes questions and completed problems in each chapter.

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• Explains how to effectively partner with suppliers and employees to achieve productivity goals

Designed for students who have a basic foundation in production and operations management, the text provides a thorough understanding of the principles of Lean. It also offers practical know-how for implementing a culture of continuous improvement on the shop floor and in the office, creating a heightened sense of responsibility in all stakeholders, and enhancing productivity and efficiency to improve the bottom line.

In this second edition, the author addresses management's role in Lean production. Early observers of Japanese methods focused on the shop floor to see amazing things unlike anything practiced elsewhere. And the thinking was, if the "methods" could be adopted by companies elsewhere, those companies would experience the success of the Japanese. What the early observers hadn't considered were dramatic differences in the way those companies were managed, both daily and strategically. The "management side" of Lean production is addressed in two new chapters, one devoted to daily management, the other to strategy deployment. Additionally, there is a new chapter that addresses breakthrough improvement and an approach to achieving it called Production Preparation Process.

Every chapter has been revised and expanded to better tell the story of Lean production—its

history, applications, practices, and methods.

Chapter 1

Race without a Finish Line

What we really cannot do is deal with actual, wet water running through a pipe. That is the central problem we ought to solve some day.

Richard Feynman

Most people have heard of Xerox, the company that invented the paper copier and for a time one of America’s best-known corporate names and employer of 100,000 people.¹ Like so many successful companies, however, it has had its share of struggles—both in maintaining market share and even staying in business. In the early 1980s, Xerox executives realized that if something radical was not done, Xerox probably would not survive to the end of the decade. The problem: Japanese companies were selling copiers for less than it cost Xerox to make them, and they had targeted Xerox to capture its market and wipe it out altogether. For Xerox, the situation was dire: Its market share was less than 15%, down precipitously from the more than 90% share it had enjoyed a decade earlier. But the competition alone was not the cause: There was no quality control to speak of, overhead and inventory costs were excessive, and there were too many managers. Further, Xerox had lost touch with its customers and was not giving them the products or service they wanted. At one time, Xerox had no competitors. Now, it had many, and customers were flocking to them.

Xerox managers and a core group of unconventional corporate thinkers mapped out a strategy to remake the company. The strategy succeeded. Xerox doubled its production output, reduced its costs by nearly 50%, reduced its product development cycle time by nearly a year, and dramatically improved the performance of its copiers. By 1990, Xerox had become the producer of the highest quality office products in the world and had gained back market share from the Japanese. By 2004, it still retained a dominant share of the high-end color copier market. Xerox accomplished this not with government subsidies, trade barriers, or import quotas but rather by adopting new management approaches that included the tenets of lean production and total quality management.

Successful recovery is, of course, not the fate of every company that has faced tough competition from overseas. It took Xerox seven years to reinvent itself, but many companies cannot afford such time. Every company is vulnerable, and the aeronautics industry is a good case in point. Up through the 1960s, the United States had been the world leader in the commercial aircraft business, holding nearly 100% of the free-world share. But in 1969, a consortium of companies from France, Germany, the United Kingdom, and Spain began to aggressively pursue that market, and the U.S. share since has steadily declined. The European share is now roughly 50%. This is not an insignificant fact given that the aeronautics industry is the single biggest manufacturing contributor to the U.S. balance of trade.

As the number of skilled contenders in a given market increases, so does the intensity of the competition. Initially, in new and growing markets, many players can survive by absorbing a portion of the growth in market size. In the global economy, the market size is large, but so is the number of players. Eventually, as market size levels out or as players differentiate themselves by ability to compete, the more skilled players drive out the less skilled players.

Competitive Advantage: Better, Cheaper, Faster, More Agile

In no small part, what differentiates competitiveness in industrial companies is the way that each designs and builds products. Paying attention to customers and knowing what they want is a fundamental beginning. However, given that competing companies all pay attention to what customers want, the key to competitiveness then becomes production capability. The differentiator between winners and losers is that winners are better able to consistently provide products and services that are competitive with regard to quality (better), price (cheaper), time (faster), and response to change (agile).

To this end, companies adopt different manufacturing philosophies, strategies, and methods. These differences are part of what distinguishes lean companies from traditional companies.²

Making things better: Traditional manufacturers strive for quality by relying heavily on computer-aided design (CAD)/computer-aided manufacturing (CAM) to enhance product design and manufacturability. In contrast, lean firms rely more on group technology and cellular manufacturing, good condition and proper placement of equipment, smaller manufacturing units, and improvement-focused employee teams. Both kinds of manufacturers rely on statistical process control, defect-reduction programs, and vendor quality programs.

Making things cheaper: Traditional manufacturers tend to rely on job enlargement programs, automation, and robotics to reduce direct labor content. In contrast, lean firms seek to achieve low cost by redesigning and simplifying products and processes, standardizing products, and reducing lead times and cycle times.

Making things faster: Traditional producers rely on robotics and flexible manufacturing systems, location of facilities, and improved labor–management relations. Lean companies emphasize continuous reduction of lead times and setup times, equipment maintenance, and broadening of workers’ jobs.

Being more agile: The ability to introduce new products and to respond quickly to changing customer demands is an area where lean companies enjoy a wide lead over traditional firms.³ Traditional firms seek agility through technology, process flow improvements, quality management, and cross-functional communication improvements. Lean firms consider agility an integral part of quality and delivery capability, and a by-product of programs to improve these areas. Thus, programs aimed at producing things better and faster are also aimed at achieving manufacturing agility.

Lean producers also take a somewhat different approach to product development. In traditional firms, product ideas tend to move sequentially through functional areas (from marketing, to engineering, to production, etc.), whereas in leans firms they percolate in dedicated product development teams. The latter allows integration of ideas during the early design stages, takes less time, and results in a better product at lower cost.

Lean Production and Total Quality Management

Another difference in the competitive strategies of traditional manufacturers versus lean manufacturers is that the former seek improvement at discrete times through capital-intensive means, such as automation and new technology, whereas the latter seek improvement through small but continuous refinements in processes and procedures, and investment in human capital. Lean production and the tandem management philosophy of total quality management (TQM) emphasize continuous attention to product and process improvements, and involvement of frontline workers in those improvement efforts.⁴ Briefly:

Lean production is management that focuses the organization on continuously identifying and removing sources of waste so that processes are continuously improved. Lean production is also called just-in-time or JIT.

TQM is management that focuses the organization on knowing what customers need and want and on building capabilities to fulfill those needs and wants.

This book is primarily about lean production, but it is also about TQM because the two philosophies are mutually dependent and, in some respects, the same. To paraphrase Schonberger,

Lean is a quality improvement tool because it cuts time delays between process stages so that the trail of causal evidence to quality problems does not get cluttered and cold. But TQM tools are needed as well or the rate of quality improvement will not be fast enough. To oversimplify, lean without TQM will be a quick response to quality problems, but to a dwindling number of customers. TQM without lean will meet correctly identified customer needs, but using methods that are costly and wasteful.⁵

That the philosophies and practices of lean production and TQM overlap is not surprising since both originated in Japan in the 1950s.⁶ In fact, the distinction between what is lean and what is TQM is an artifact of the way Westerners chose to adopt Japanese practices. Such a distinction never existed in Japan.

Lean Production and the Production Pipeline

Think of a company as a pipeline with raw materials entering at one end and products exiting at the other.⁷ The goal is to minimize throughput time, that is, to move materials (or ideas, or orders) through the pipeline as fast as possible. Shorter throughput time is better because, assuming price and quality remain constant, the company can respond more quickly to changes in customer needs. The customer gets the product sooner; the company gets the payment sooner.

But the production pipeline is seldom uniform and without obstacles. What flows out of the pipeline is limited by the biggest obstruction. Portions of the pipeline that are obstructed are in reality equivalent to the stages of the production process where stoppages or slowdowns occur. Obstructions to uniform flow and rapid throughput are commonplace, particularly in plants that produce a variety of products with different, fluctuating demands.

To speed up the flow through the pipeline, the obstructions must be identified and eliminated. As each obstruction is eliminated, the flow speeds up, but only by as much as allowed by obstructions elsewhere in the pipeline. Identifying the obstructions, understanding them, and finding ways to eliminate them is the thrust of lean production.

The pipeline analogy gives the impression that barriers to production, once identified, can be removed once and for all. In reality, that is impossible. First, there are often a large number of phases, stages, or steps, and it is difficult to identify the precise location of every obstruction. Also, the sources of obstructions keep changing—machines break down, parts run short, and so forth. As some obstructions are removed, new ones appear. Further, the pipeline itself and the things that flow through it are always changing. Customer orders change, so the flow rate must be adjusted to accommodate the right kind and quantity of materials. In the analogy, the pipeline diameter might have to be widened or narrowed. A pipe that is wider than necessary is wasteful, and so is a flow rate that exceeds demand. In addition, the products are changing too, so the process must be adapted (the pipeline itself must be modified or replaced), and that introduces a whole new set of obstructions. In short, work on the pipeline is continuous.

Lean production is a way of continuously tinkering with the pipeline so the material coming out of it is the best possible. Lean production continuously seeks ways to make the pipeline more adaptable to whatever materials or flow rates are desired, to match the material flow as closely as possible to customer demand, and to make the material coming out ever more satisfying to the customer.

The Lean Difference

Most organizations seek to identify and eliminate obstru...