Managing a Lean Enterprise

Adopting a culture of continuous improvement can lead to an increase in efficiency, quality and safety throughout a facility.

Imagine a plant with 3,000 lift trucks sitting outside, tools in the wrong location and assembly line personnel working 72-hour weeks, modifying every truck to add its missing parts.

Stressed yet?

This was the scene at Mitsubishi Caterpillar Forklift America Inc. (MCFA) seven years ago as the manufacturer and distributor of lift trucks faced the challenge of improving operations.

To ease these tensions and combat the chaos, MCFA began implementing a process commonly referred to as lean manufacturing, a practice centered on streamlining the supply chain to support the end user.

With roots dating back to Henry Ford, the Toyota Production System and GE's Six Sigma, lean manufacturing is hardly a new concept, but with end trade-offs like more options for customers, larger percentages of production costs savings and a strong work culture, the practice has become widely accepted as a great way to do business.

Admittedly, planting the seed and managing the lean process can be difficult at first. After the company's initiation of lean in 2003, it took three to five years to see visible bottom-line results such as millions saved in parts and labor costs, an 80% reduction in internal manufacturing lead time, a 75% reduction in manufacturers' warranty claims and increasingly fewer safety incidents.

Though difficult to start, once a staff has fully embraced lean manufacturing and it takes root in a company culture, the idea of continuous improvement takes hold. The lean legacy is so engrained at MCFA that long after current management leaves, the processes will continue.

Spreading the Concept

Although the lean process caught on in the industry following the review of the Toyota Production System in the 1990 book The Machine That Changed the World by Womack, Jones and Roos, the practice has spread extensively over the past decade because of its reputation to continually improve, cutting out waste in production, supply chain and management (see sidebar, “Leaning in the Right Direction,” p. 17).

Lean is a fairly common practice in the manufacturing industry, with even more manufacturers moving towards implementing it. These practices have been put to use in the material handling facilities, starting in Japan with companies like Toyota, and spreading to Europe and the United States. In recent years, such U.S. companies as Caterpillar and John Deere have adopted and formalized their production systems, significantly improving their overall operations.

Spreading the concept has been a group effort, with companies helping others improve their overall processes and flow by offering benchmark tours of their plants to local manufacturers and even competitors. In Houston, the Texas Manufacturing Assistant Center helps smaller manufacturers execute lean concepts. The University of Houston recently did a study for the Houston Police Department to reorganize its impounded inventory storage, helping the police department to reduce inventory, locate items more quickly and become more efficient.

Looking Lean

If someone were to walk into a lean manufacturing facility, they might notice practices like building products to order, providing a dealer pool and hosting just-in-time inventories.

Building to order allows customers to choose any option offered, leading to a highly customized, configurable product built to exact specifications. This process is highly visible down the production line, because no two orders are the same.

At MCFA, the dealer pool is a small strategic stock of products stored at the plant. With this, dealers have a selection of pre-made products to choose from, allowing a fast turn for their customers if needed.

Just-in-time inventory reflects its namesake — parts are ordered so they arrive on the line just in time to be added to the destined lift truck. This concept strives to reduce in-process inventory and associated carrying costs, improving material flow to a high-speed, high-turnover, low-touch supply chain.

Achieving Results

These processes, when set up properly, lead to a faster supply chain and a drastic reduction in lead times.

For MCFA, the reorganization of the production system to a “one-piece flow” exponentially increased efficiency, cutting the manufacturing time of a lift truck from 10 days to 48 hours. One-piece flow refers to the process of eliminating batch productions of items customers or dealers may never order and instead manufacturing only the products specifically ordered by customers, leading to large reductions in purchasing parts and labor costs.

Increased efficiency practices also lead to improved safety and a higher quality of work. In 2009, MCFA averaged fewer than two incidents of injury per month, while the Occupational Safety and Health Administration (OSHA) national average is over five. In the first four months of 2010, MCFA reported zero incidents.

MCFA also received more than 75% fewer manufacturing warranty claims, meaning the product is being manufactured correctly the first time. This practice is reinforced through an internal initiative deemed “quality focus,” where the company emphasizes driving quality back to the source.

Establishing Lean Processes

As an organic process, lean manufacturing is based on continual evaluation and improvement of overall operations and is thus established in small increments.

When launching a lean process, first identify the product, understand the customer base and establish what the demand will be. Set-up operations and processes based on the maximum time to produce a product unit in order to meet demand, a metric called “TAKT time.”

Here are three tools to help implement lean processes:

Value Stream Maps

This procedure works through every step of a process to see how each piece impacts each other, ensuring improvements to certain areas don't result in problems elsewhere, either downstream or upstream. The exercise also establishes the current state of a company's processes and a future state or a foreseeable milestone. When the future state becomes the current state, the process starts over. Creating short-range and long-range value stream maps allows a company to make sure all smaller goals are achieved, while keeping the big picture in mind.

A3 Thinking

A term coined from capturing the production process in a single A3-sized sheet of paper, this high-level thought process helps managers create an overall management philosophy, establishing goals, expectations, milestones and deliverables.

5S

A popular lean manufacturing term with Japanese origin, 5S refers to workplace organization where the right parts and work tools are in the correct place, allowing for speedy and efficient production. 5S provides an easy way to help employees remember and integrate the process into their daily routine: sort, shine, set in place, standardize and sustain.

Get on Board

Although the initial costs of implementing a lean enterprise can be extremely high, the most critical hurdle to overcome is getting all staff members on board. Workers have to fully embrace the lean concept for it to truly take effect. Here are some tips for gaining acceptance:

Institutionalize

It's crucial to make this come across as a normal course of business so staff realizes this is not a “flavor of the month” passed down from management.

Educate

Train all employees on the manufacturing process so that they fully understand the concepts and expectations.

Take suggestions

All staff levels should be encouraged to continually provide developmental ideas by engaging in continuous improvement activities, like a suggestion box. Be sure to record the successes that came from suggestion-based changes as a reminder to the employees of how they've helped improve the company.

Provide the right tools

By implementing the 5S process and providing your workers with the right tools for the job, you will alleviate frustration and help employees feel more confident about implementing the new processes.

Give it time

Full internal adoption of this concept by employees can take multiple years, but stick with it and refer back to the processes regularly.

By providing staff the tools for success and receiving acceptance, the quality of work will increase because employees are in control — able to manage their workloads and complete their work within typical business hours. This stabilizes the work/life balance and establishes trust and pride in the company culture.

When Lean Catches On

Happy, well-supported workers produce better results in better time.

Once employees are on board and processes like A3 Thinking, Value Stream Mapping and 5S are in place, manufacturers should begin to see an overall increase in efficiency, quality and safety, resulting in substantial savings and a company culture that will last.

Cultivating a lean enterprise is the hardest part of the process. However, once the seed takes root and begins to grow, the company will harvest the benefits of lean, continually enriching and improving upon itself.

David Greathouse is director of manufacturing at Mitsubishi Caterpillar Forklift America Inc. (MCFA), the manufacturer and distributor for Cat, Mitsubishi and Jungheinrich lift trucks.

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